RBI launches twin USD-INR forex swap facilities to attract foreign currency inflows

The Reserve Bank of India (RBI) has launched two distinct US Dollar-Rupee forex swap facilities, a strategic move designed to attract foreign currency inflows and bolster the nation's external financing capabilities. The initiative follows announcements made by RBI Governor Sanjay Malhotra on June 5.

The first facility targets fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits. Authorized dealer banks can access this swap facility for deposits mobilized for a minimum tenor of three years and a maximum of five years. While deposits can be raised in any freely convertible currency, the swap with the RBI will be exclusively in US dollars. This facility is effective immediately and will remain open until October 16, 2026, for deposits mobilized up to September 30, 2026.

The second facility is aimed at eligible External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs). This swap facility will be available for ECBs with an average maturity of three years or more, and for OFCBs raised by banks with a minimum maturity of three years. Similar to the FCNR(B) facility, the swap transaction with the RBI will be conducted only in US dollars, with a maximum tenor aligned with the borrowing's repayment schedule, capped at five years. This facility will be available until January 15, 2027.

These twin swap facilities are expected to encourage foreign currency inflows, enhance hedging options for banks and borrowers, and ultimately strengthen India's external sector buffers. The measures are particularly relevant given the evolving global financial conditions.