YEREVAN, September 2. /ARKA/. Indian banks have attracted $127.23 billion in currency deposits from non-residents as part of a special program by the Reserve Bank of India (RBI), primarily aimed at the Indian diaspora.
According to RBI, these are deposits under the Foreign Currency Non-Resident (Bank) — FCNR(B) scheme. The total volume of currency inflows under this special mechanism reached $136.38 billion by August 31. In addition to non-resident deposits, $5.26 billion came from foreign currency borrowings by banks, and another $3.89 billion from external commercial borrowings.
The program was announced by RBI in June 2026 to attract foreign capital, strengthen India's balance of payments, and stimulate the inflow of funds. It was launched amid increased uncertainty in global markets and pressure on the Indian rupee.
A key element of the program was a special currency swap mechanism. Banks could attract currency deposits from non-residents for terms of three to five years, sell the received currency to RBI, and simultaneously enter into a deal for its repurchase at the same exchange rate after the swap period ended. Thus, RBI effectively removed the risk of dollar/rupee exchange rate fluctuations for the funds transferred under the swap and significantly reduced currency hedging costs.
To enhance the attractiveness of such investments, RBI also temporarily lifted the previously set ceiling on interest rates for new FCNR(B) deposits with terms of three to five years. This allowed Indian banks to set more competitive rates independently and actively attract funds from Indians living abroad.
For depositors, an important advantage of FCNR(B) is that funds are placed and returned in foreign currency, so the depositor does not bear the risk of a decline in the rupee's value. Funds in such accounts can be repatriated outside India. However, deposits attracted under the special program involved a one-year lock-in period, after which the bank could allow early withdrawal.
Initially, the attraction of FCNR(B) deposits under the special program was planned until the end of September, but due to the massive inflow of funds, RBI closed this window early on August 31. The mechanisms for attracting external commercial and foreign currency borrowings continue to operate until the end of 2026.
