RBI's FCNR(B) rule 'data-driven' or policy U-turn?

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Key points

• The RBI expects the three schemes-FCNR(B), overseas foreign currency borrowings (OFCBs) and external commercial borrowings (ECBs) to attract at least $80 billion to India's pocket.
• According to RBI Governor Malhotra, the foreign currency assets received through the swaps would appear as foreign currency assets, swelling the central bank's balance sheet.
• RBI Governor Sanjay MalhotraFCNR(B) deposit schemeFCNR depositsNRI deposits schemeRBI FNCRfcnr deposit ratesOFCBfcnr swaprbi fcnr news.
• Power shift, a déjà vu: Air India could be new CEO's toughest flight yet.
• Defending the central bank's decision, Malhotra described it as a well-thought-out, calibrated, prudent and data-driven response to evolving conditions.

RBI's early FCNR(B) deposit scheme closure 'data-driven' or a policy U-turn? Governor Malhotra explains.

RBI's early FCNR(B) deposit scheme closure 'data-driven' or a policy U-turn? Governor Malhotra explains. ET OnlineLast Updated: Aug 20, 2026, 08: 50: 00 AM IST.

RBI Governor Sanjay Malhotra defended the FCNR(B) deposit scheme's early closure. He stated the decision was data-driven and a prudent calibration. This move intends to attract $80 billion into India's economy. The central bank cited stronger than projected dollar inflows for the adjustment. In practice, the RBI remains committed to managing exchange rate volatility and market conditions.

Reserve Bank of India (RBI) Governor Sanjay Malhotra asserted that the decision to advance the closure of Foreign Currency Non-Resident (Bank), or FCNR(B) deposit scheme by a month was 'data-driven and caliberated'. In an interview with the Financial Express, he remarked that it will not be correct to call it a U-turn; it is rather a calibration as the move demonstrated the central bank's ability to remain flexible and data-dependent against the backdrop of rapidly changing conditions. Defending the central bank's decision, Malhotra described it as a well-thought-out, calibrated, prudent and data-driven response to evolving conditions.

RBI to close FCNR(B) forex swap facility early after solid dollar inflow The announcement came on August 14, almost two weeks after the Monetary Policy Committee (MPC) gathering where the central bank governor had ruled out an early closure. Live Events.

"We have obtained robust flows as mentioned, and we do hope to secure good healthy close going forward. As of now, there is no proposal under consideration to close the scheme prematurely, " Malhotra had remarked at the post-policy press conference. Responding to criticism over the remarks, he informed FE RBI was still assessing a situation that was evolving rapidly. "I would like to highlight the use of the words 'as of now' when I mentioned that there was no proposal to advance the last date, " he remarked, adding that the central bank had additionally noted it would keep stakeholders informed of any decision, clearly indicating that an early closure had not been ruled out. According to Malhotra, the policymakers took the decision from a position of strength. $80 billion forex overhaul.

Notably, the RBI expects the three schemes-FCNR(B), overseas foreign currency borrowings (OFCBs) and external commercial borrowings (ECBs) to attract at least $80 billion to India's pocket. This policy plan reflects the country's solid macroeconomic fundamentals and would further strengthen its balance of payments, he informed the publication. The central bank introduced the special window after global uncertainty and capital outflows pressurised the rupee. Besides the swap facility, it additionally relaxed pricing norms, allowing banks to offer higher interest rates on eligible FCNR(B) deposits. In practice, a number of lenders, including Indian Bank, HDFC Bank and ICICI Bank, have since raised FCNR(B) deposit rates to attract more NRI capital.: Will FCNR (B) deposit scheme end? RBI Governor remarked this at MPC Unveiling the NRI deposits scheme, the RBI had previously stated the measures are aimed at encouraging durable foreign currency inflows rather than short-term capital, with the FCNR(B) deposits carrying a mandatory one-year lock-in under the special facility. The RBI afterwards unveiled advance withdrawal of the scheme citing stronger than projected dollar inflows. "There is a diminishing marginal utility of every dollar that is swapped. Meanwhile, there is an increasing marginal cost since you need to sterilise it for a longer period, " Malhotra stated. The central bank allowed more than two weeks time to stakeholders to create the necessary arrangements and benefit from the scheme during the remaining period. It the RBI considered sufficient, he stated on reservations around the sudden nature of the announcement. Malhotra further continued that the decision to close the temporary facility early was part of the RBI's external-sector management. Though, the underlying objective of the facility-to attract foreign currency assets and strengthen the external sector-remained unchanged.: RBI's FCNR U-turn dents policy certainty How will the NRI deposits appear in RBI balance sheet?

According to RBI Governor Malhotra, the foreign currency assets received through the swaps would appear as foreign currency assets, swelling the central bank's balance sheet. Further, the outstanding forward leg would be displayed as a contingent liability and remain an off-balance-sheet item. As robust foreign currency inflows improve the country's external position, a report by SBI Research expects India's balance of payments (BoP) to post a surplus of around USD 50 billion in FY27, with the current account deficit (CAD) probable to remain contained at 1 per cent of GDP. While another USD 25-30 billion could flow in during the remaining days of August, taking total collections to around USD 85 billion, the report edtimated, rBI's FCNR(B) deposit mobilisation scheme has already attracted USD 57 billion in inflows. Speaking regarding the rupee and the RBI's record net short forward-dollar position, Malhotra stated the position remained "very manageable", and was was primarily the result of swaps previously undertaken to infuse liquidity and the latest facilities intended to strengthen the balance-of-payments position. "The exchange rate continues to be market determined. Our policy on intervention remains the same. It is to curb excessive volatility and any undue speculative activity, " he remarked, emphasising that the RBI remained committed to ensuring orderly financial conditions and orderly movements in the exchange rate. Add Now!

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In short, rBI' s FCNR(B) rule ' data-driven' or policy U is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.