RBI may have found a way to bring $50 billion into India

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Hello folks, you're tuned in to Finshots Daily. In today's episode, we tell you how the RBI's special swap facility for banks works and why it would attract foreign capital into India.
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Last week, the RBI released two notifications. One said, It has been decided to introduce a US dollar rupee forex swap facility for fresh FCNRB deposits, mobilized for a minimum tenner of three years and maximum tenner of five years.
The other announced, It has been decided to introduce a US dollar rupee forex swap facility for external commercial borrowings or ECBs of average maturity of three years and above. And believe it or not, these two dry sounding notifications could end up attracting nearly 50 billion dollars in foreign capital into India. Now, we know what you're thinking. Apart from the phrase US dollar rupee forex swap facility showing up in both statements, everything else sounds painfully technical. So before we get to the 50 billion dollar bit, let's first break down what the RBI is actually talking about. Alright, let's imagine you're an Indian living in the US with 50,000 dollars sitting in a savings account, earning about 4-5% a year. Then an Indian bank calls and says, Hey, deposit those dollars with us for 3 years. We'll pay you around 7% annually in dollars. And when the deposit matures, you will get your dollars back in full, regardless of how the rupee behaves. No currency risk whatsoever. That's essentially what the RBI has made possible with these notifications. The reason is simple. The rupee has been steadily weakening against the dollar, as dollars have been flowing out of India for a while. For one, foreign institutional investors have sold roughly $45 billion worth of Indian assets since 2024 Then in 2025, foreign portfolio investors recorded net stock sales of $18.9 billion.
That's by far the biggest annual outflow since 1992 And in just the first four months of 2026, FBIs have already sold over $20 billion, surpassing all of 2025
At the same time, NRI dollar deposits in Indian banks, technically called FCNRB deposits, have also fallen sharply. When that happens, dollars start flowing out of India, and the supply of dollars available in the domestic market shrinks. Naturally, dollars become scattered, and that means it takes more rupees to buy a single dollar. Which tells you one thing, India badly needs dollars to stabilize the rupee. And for that, the RBI needed a plan. The centipedes of which are these two special US dollar rupee forex swap facilities, one for FCNRB deposits, and another for external commercial borrowings or ECBs.
Basically, when banks receive money in dollars, either as deposits from NRIs, or through overseas borrowings called ECBs, they can't immediately put those dollars to work. Because to lend money in India, banks need rupees. That's where these swap facilities come in. Banks hand over their dollars to the RBI and get rupees in return. Say the RBI swaps dollars at today's exchange rate of 95 rupees per dollar. Three or five years later, when the arrangement ends, the RBI gives banks back their dollars at the same exchange rate, even if the rupee has weakened to say 100 rupees per dollar by then. Normally, banks pay roughly 3.5% a year for this kind of protection. That cost is called hedging cost or basically insurance against the rupee weakening. But this time, the RBI is sweetening the deal by removing the currency risk. For fresh FCNRB deposits mobilized until September, banks pay zero hedging cost. And for dollars coming via ECBs, the RBI is offering swaps at a flat 1.5% per year until Jan 2027, which is still roughly half of the usual market rate. There's another incentive too. Usually, banks must park a chunk of deposits with the RBI as reserves through something called cash reserve ratio, CRR, and statutory liquid ratio or SLR requirements. That means not every 100 rupees collected can actually be lent out. But FCNRP deposits brought in during this special window are exempt from these rules, and that's actually a big deal. To give you a better understanding of this, let's imagine a bank raises 100 rupees and lends at about 10%.