RBI forex measures may attract USD 55-65 bn inflows in FY27: SBI Research

The Reserve Bank's latest foreign exchange measures could attract USD 55-65 billion of inflows in FY27, help push the balance of payments (BoP) into surplus and narrow the banking system's credit-deposit gap, according to a report.

In its Ecowrap report, SBI Research estimated that the FCNR(B) swap facility could bring in USD 40-45 billion, while the ECB/OFCB swap windows may garner another USD 15-20 billion in FY27, taking the total potential inflows to USD 55-65 billion.

The assessment comes after the RBI announced a special US dollar-rupee forex swap facility for fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits and similar swap windows for eligible external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) to attract overseas capital and ease external funding conditions.

"The RBI's February and June 2026 measures should be viewed as a coordinated attempt to stabilise the rupee, deepen the domestic debt market, attract more stable foreign capital and reduce friction for external funding," the report said.

The RBI on Monday introduced a dollar-rupee forex swap facility for fresh FCNR(B) deposits mobilised by banks for tenures ranging from three to five years.

Under the arrangement, banks can sell US dollars to the RBI and simultaneously agree to buy them back at the end of the swap period.

The facility will be available for fresh FCNR(B) deposits mobilised up to October 16, 2026.

The RBI has also exempted such deposits from cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements until September 30, 2026.

Deposits will carry a one-year lock-in period.

The central bank has also announced swap facilities for eligible ECBs raised by public sector undertakings and OFCBs raised by authorised dealer banks.

Drawing parallels with the 2013 FCNR(B) mobilisation scheme, SBI Research said about USD 24.5 billion had flowed into FCNR(B) deposits in just three months then, and the longer four-month window this time could attract USD 40-45 billion.

However, it noted that the interest rate differential between India and the US has narrowed sharply since 2013.

“Indian Government bond yields for 3-year tenure was around 8.9% and while the US 3-year treasury yield was 0.9% giving interest differential of 8.0% in 2013,” the report said. “ In case of 3 years the rate gap has now reduced to 2.1% and for 5 year it has narrowed down to 2.2%.”

The report said banks could offer FCNR(B) deposit rates of 5.5-6%, compared with current three-year US Treasury yields of around 4.2%, making the product attractive for overseas depositors.

According to SBI Research, the ECB/OFCB swap window will lower hedging costs, encourage fresh foreign currency borrowings and improve dollar liquidity.

The report estimated that banks could raise USD 5-8 billion through OFCBs, while ECB/FCCB inflows may amount to USD 10-12 billion in FY27.

The inflows are expected to support deposit growth in the banking system.

SBI Research projected deposit growth of 14.5-15% in FY27 against an estimated credit growth of 16%. This would result in the credit-deposit gap shrinking by around ₹1 lakh crore.

The report said the gap could narrow to less than 2% from a peak of 6.7% in FY24.

It further estimated that the additional inflows could transform India's external position, with the overall BoP moving to a surplus of USD 5-10 billion in FY27 from its earlier projection of a USD 65-70 billion deficit.

The current account deficit is expected to remain in the range of 1.5-1.7% of GDP.

SBI Research also said the measures could help ease funding pressures, soften market borrowing costs and support transmission of lower interest rates across financial markets.

It cautioned, however, that the RBI should continue to intervene decisively to prevent excessive rupee depreciation and anchor market expectations.

“In the current environment, a passive approach could prove costly,” the report said. “A decisive RBI intervention would help anchor expectations, contain imported inflation, reduce pressure on the external account, and preserve macro-financial stability.”