The Reserve Bank of India has released detailed guidelines for its newly announced foreign-exchange support measures aimed at attracting overseas capital and strengthening India's external financing position. The measures focus on encouraging foreign currency deposits and overseas borrowing by public-sector entities while reducing hedging costs for banks and borrowers.
Under the new framework, Indian banks can mobilize Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits in any freely convertible currency. However, the RBI's special swap facility will be available only in U.S. dollars. The facility is designed to compensate banks for the cost of hedging foreign-currency deposits with maturities ranging from three to five years. Deposits raised under this scheme must have a minimum lock-in period of one year.
The central bank will provide swaps at a fixed rate of 1.5% per annum, compounded semi-annually, making the facility significantly more attractive than prevailing market hedging costs. Once entered into, these swap agreements cannot be cancelled. The facility is available immediately and will remain open until October 16, 2026 for eligible FCNR(B) deposits mobilized up to September 30, 2026.
In addition, the RBI has extended support to External Commercial Borrowings (ECBs). Overseas borrowings with an average maturity of at least three years raised by public-sector undertakings will qualify for the swap facility. Banks will also be allowed to exclude swap positions arising from FCNR(B) deposits and eligible ECBs while calculating their net open rupee position, providing greater flexibility in balance-sheet management.
The ECB-related swap window becomes effective immediately and will remain available until January 15, 2027 for eligible drawdowns. By lowering hedging costs and encouraging foreign-currency inflows, the RBI aims to increase the availability of overseas funding, support foreign-exchange reserves, stabilize the rupee, and improve liquidity in India's financial system.
The announcement comes as policymakers seek to attract more foreign capital amid evolving global financial conditions. Market participants generally view the measures as supportive for banks, public-sector companies, and India's overall external financing outlook, while helping cushion the economy against potential volatility in global capital flows.
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