What RBI’s new FCNR swap facility means for NRIs and banks

The Reserve Bank of India (RBI) has introduced a US dollar-rupee forex swap facility for fresh FCNR(B) deposits mobilised by banks with a tenor of three to five years, according to a central bank release.

The move is aimed at attracting longer-term foreign currency inflows and improving external financing conditions.

What RBI has announced

Under the new framework, banks will be able to enter into swap transactions with the RBI for eligible FCNR(B) deposits.

The RBI said, “a bank can sell US Dollars in multiples of USD one million to the RBI and simultaneously agree to buy the same amount of US dollars at the end of the swap period.”

The swap facility will be available for fresh FCNR(B) deposits mobilised in any freely convertible currency, including renewed deposits upon maturity. However, the actual swap with the RBI will be conducted only in US dollars.

What are FCNR(B) deposits?

Foreign Currency Non-Resident (Bank) or FCNR(B) deposits are fixed deposits maintained by Non-Resident Indians (NRIs) in foreign currency.

These deposits allow NRIs to earn interest in foreign currency while protecting them from exchange rate risk, as both principal and interest are maintained in the same currency.

Tenor, lock-in, and conditions

The RBI has specified that the eligible deposits must have a tenor between three and five years.

The underlying deposits will carry a minimum lock-in period of one year. After this, banks may allow premature withdrawal based on their internal policies.

However, the RBI has made it clear that once a swap is undertaken, it cannot be cancelled.

“The underlying deposits will have a lock-in period of one year… however, swaps undertaken with the RBI cannot be cancelled,” the central bank said.

How the swap mechanism works

Under the arrangement, a bank can sell US dollars to the RBI and simultaneously agree to repurchase the same amount at the end of the swap period.

The first leg of the transaction is settled at the FBIL reference rate, while the second leg is completed at the same rate, effectively making it a par swap.

The facility will be operated by the RBI’s Financial Markets Operations Department in Mumbai and will be conducted in an orderly manner based on market conditions.

Banks react with higher FCNR deposit rates

Punjab National Bank (PNB) has revised its FCNR(B) rates, offering 6.00% for 3-year deposits, 6.05% for 4-year deposits, and 6.10% for 5-year deposits, news agency ANI reported.

AU Small Finance Bank has also raised its peak USD FCNR(B) deposit rate to 7.10% from 5.15%, effective June 10, 2026, reflecting stronger demand for foreign currency deposits and alignment with the RBI’s new framework.

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