RBI closing special foreign currency deposit window on August 31
What's the story
The Reserve Bank of India (RBI) has advanced the closure date for its special Foreign Currency Non-Resident (Bank) [FCNR(B)] deposit scheme. The new deadline is now August 31, 2026, instead of September 30. This move comes as a response to strong foreign currency inflows under the facility. As of August 13, FCNR(B) deposits mobilized through this scheme had reached $52.3 billion, while total inflows via wider forex facilities were around $56.8 billion.
Liquidity boost
Scheme aimed at improving banking system liquidity
The FCNR(B) scheme was primarily intended to bolster banking-system liquidity and financial stability, rather than significantly boosting reported foreign exchange reserves or driving a sharp appreciation in the rupee.
CareEdge Ratings had initially estimated FCNR(B) mobilization at $60-80 billion, noting that such inflows could provide banks with stable medium-term funding, while easing pressure from credit growth outpacing deposit mobilization.
Future implications
Early closure may limit additional inflows
The early closure of the FCNR(B) scheme could limit additional inflows banks might have attracted through September.
However, CareEdge Ratings believes that the substantial mobilization achieved so far should continue to support banks' liquidity positions and liability profiles.
This is because FCNR(B) deposits offer a potentially cheaper source of funding compared to domestic deposits, helping address elevated credit-deposit ratios in the banking system.
Funding source
FCNR(B) deposits to remain supplementary
CareEdge Ratings also noted that the contribution of FCNR(B) deposits to banks' overall funding base would remain supplementary rather than structural.
Even under its earlier mobilization projections, FCNR(B) deposits were expected to account for only around 3% of total deposits.
Overall, CareEdge believes the FCNR(B) program has largely achieved its goal of strengthening external liquidity and easing funding pressures across the banking system.