Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said there is no proposal to prematurely discontinue the Foreign Currency Non-Resident (Bank) or FCNR(B) deposit incentive scheme, which has helped attract strong capital inflows and bolster the country’s external position.
Speaking at a press conference after the announcement of the RBI’s monetary policy review, Malhotra said the concessional zero-cost swap facility offered under the scheme remains fully operational and will continue until its scheduled expiry on September 30, 2026.
The FCNR(B) mobilisation drive has enabled Indian banks to raise $36.7 billion in FCNR deposits as of July 31, 2026, helping support the rupee against the US dollar amid pressure from rising global crude oil prices. The inflows are also expected to push India’s foreign exchange reserves beyond the $700 billion mark in the coming weeks.
“Even before these measures came in, we had a very strong and comfortable external position. This further fortifies our external position,” Malhotra said.
The RBI Governor reiterated that the central bank does not target a specific exchange rate and allows market forces to determine the rupee’s value.
“We only intervene in case there is an excessive volatility or there are speculative pressures that are getting built in,” he said, adding that the RBI would continue to ensure orderly movements in the rupee without disruptive fluctuations or self-fulfilling market expectations.
Major lenders, including the State Bank of India (SBI) and ICICI Bank, have together accounted for more than half of the inflows mobilised under the FCNR(B) special deposit scheme.
To attract higher overseas deposits, the RBI had temporarily relaxed interest rate restrictions on FCNR(B) and Non-Resident External (NRE) deposits until September 30, 2026.
Under the revised framework, banks are free to determine interest rates on fresh FCNR(B) deposits with maturities of more than three years and up to five years, as well as on fresh NRE deposits with maturities of three years and above.
The relaxation gives banks greater flexibility to offer higher returns to non-resident Indians, encouraging mobilisation of foreign currency and rupee deposits from overseas investors and savers.
Before the relaxation, banks were required to keep interest rates on NRE deposits at or below those offered on comparable domestic rupee term deposits. Interest rates on FCNR(B) deposits with maturities between three and five years were capped at the applicable overnight alternative reference rate or swap rate plus 350 basis points.
(With inputs from IANS)
