Banking stocks rally as RBI introduces US dollar-rupee forex swap facility for FCNR deposits

Reserve Bank of India has introduced a US dollar-rupee forex swap facility for fresh FCNR (B) deposits mobilised by banks for a minimum tenor of three years and a maximum of five years to attract foreign capital.

Foreign Currency Non-Resident (Bank) deposits are foreign currency term deposits maintained by non-resident Indians (NRIs).

Through this swap facility, the central bank aims to attract stable and consistent foreign inflow which could help stabilise the Indian rupee. The domestic currency has witnessed high volatility in 2026 and has depreciated by around 7% against the US dollar.

As per the RBI circular, domestic banks can sell US Dollars in multiples of USD one million to the central bank (RBI) and simultaneously agree to buy the same amount of US dollars at the end of the swap period. Hence, eliminating the exchange rate risk for the banks.

How will banks benefit from this RBI swap facility?

RBI’s USD-INR forex swap facility could be positive for the banks as this facility eliminates exchange rate risk and reduces hedging costs. By absorbing this risk, the RBI allows banks to mobilise multi-year foreign capital and generate much-needed domestic rupee liquidity without straining their balance sheets. However, the swap facility with RBI will be available in US dollars only.

Banking stocks are trading in a positive zone on Tuesday, June 9 as NIFTY Bank rose 1.23% today to trade around 54,730. IDFC First Bank, IndusInd Bank and Yes Bank were among top NIFTY Bank gainers rising over 2% respectively.

In the past few weeks, RBI has introduced a series of measures to attract foreign fund inflow into the domestic economy.

Through another circular, the RBI also announced a US Dollar-Rupee Forex Swap Facility for external commercial borrowings (ECBs) of average maturity of three years and above by public sector undertakings (PSUs).

The swap facility has also been introduced for Overseas Foreign Currency Borrowings (OFCBs) raised by Authorised Dealer Category I banks for a minimum maturity of 3 years.