Foreign capital inflows hit $32 billion as FCNR(B) deposits break 2013 record
The Reserve Bank of India's special dollar-inflow measures, announced in early June 2026, have together attracted close to $32 billion in foreign capital
Foreign Currency Non-Resident (Bank) — FCNR(B) — deposits mobilised under the scheme have already exceeded the previous high recorded in 2013
A portion of the total inflow, around $7 billion, came through foreign portfolio investment into debt securities following related tax changes, with the remainder concentrated in FCNR(B) deposits
Despite the strong inflows, the rupee has remained near record lows, with strong dollar demand linked to costly crude oil imports and limited hedging activity by exporters continuing to weigh on the currency
FCNR(B) Deposits — Mechanism and Purpose
FCNR(B), or Foreign Currency Non-Resident (Bank) deposit, is a term-deposit account that Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can hold in designated foreign currencies (such as USD, GBP, EUR, JPY, AUD, CAD) with Indian banks. Because the deposit and its returns are held in foreign currency, depositors bear no exchange-rate risk, making it an attractive route for NRIs to earn returns without rupee depreciation risk, and a key channel through which the RBI can attract dollar inflows during periods of currency pressure.
Key Details
- Principal and interest are fully repatriable and tax-free in India, similar to Non-Resident External (NRE) accounts
- In early June 2026, the RBI announced a special swap facility for fresh FCNR(B) deposits with three-to-five-year tenors, opening the window on June 8, 2026, and absorbing part of the associated hedging cost so banks could offer higher rates to depositors
- A mandatory one-year lock-in applies to deposits raised under this special scheme — banks cannot permit premature withdrawal during the first year
The bulk of the $32 billion raised so far has come through this FCNR(B) route, with the balance from debt-market FPI inflows following related tax changes — making FCNR(B) the primary lever the RBI has used to defend the currency in 2026.
The 2013 FCNR(B) Swap Scheme — Historical Precedent
The current episode directly echoes the RBI's response to the 2013 "taper tantrum," when concerns over the US Federal Reserve tapering its bond-buying programme triggered a sharp sell-off in emerging-market currencies, including the rupee.
Key Details
- Then-RBI Governor Raghuram Rajan, on taking charge in September 2013, opened a swap window offering banks a fixed rate of 3.5% for three-year FCNR(B) deposits, to attract dollar inflows
- Between September and November 2013, banks raised roughly $34 billion in total — around $26-27 billion via FCNR(B) deposits and $7-8 billion via external commercial borrowings (ECBs)
- The rupee had fallen to a then-record low of 68.85 per US dollar on August 28, 2013, before the scheme helped stabilise it
The article's framing — FCNR(B) deposits "breaking the 2013 record" — measures the current $32 billion (largely FCNR(B)-driven) inflow against this well-known historical benchmark, a comparison UPSC could test directly (scheme design, rates, and outcomes in 2013 vs. 2026).
Balance of Payments Management and RBI's Forex Tools
The Balance of Payments (BoP) records all economic transactions between India and the rest of the world, split into the current account (trade, services, remittances) and the capital account (investment flows, borrowings, deposits). When a widening current account deficit puts pressure on the rupee, the RBI can use capital-account tools — such as special deposit swap windows, relaxed External Commercial Borrowing (ECB) norms, and higher Foreign Portfolio Investment (FPI) limits — to attract offsetting capital inflows.
Key Details
- The RBI's Monetary Policy Committee, established under Section 45ZB of the RBI Act, 1934 (inserted by the Finance Act, 2016), targets retail inflation but operates alongside separate RBI tools for exchange-rate and forex-reserve management
- The RBI also intervenes directly in spot and forward currency markets to smooth excessive volatility, without targeting a specific exchange-rate level
- India's crude oil imports account for over 88% of domestic consumption, making the oil import bill a major structural driver of dollar demand and current account pressure
The article notes that despite $32 billion in fresh inflows, the rupee remains near record lows — illustrating that capital-account inflows can offset, but not fully neutralise, current-account pressure from a large and rising oil import bill.
Exchange Rate Depreciation Drivers in 2026
The rupee has depreciated significantly through 2026, driven by a combination of rising crude prices, a widening trade deficit, and cautious exporter behaviour.
Key Details
- The rupee touched a record low of around 96.90 against the US dollar in 2026
- India's trade deficit widened to $28.4 billion in April 2026 (from $20.67 billion in March 2026), with the crude oil import bill for that month at roughly $18.7 billion
- Limited forward-hedging by exporters (who delay converting dollar receivables in anticipation of further rupee weakness) adds to spot-market dollar demand, compounding depreciation pressure
These structural pressures are the backdrop against which the RBI's FCNR(B)-led inflow drive is being read — the $32 billion has helped shore up reserves and capital flows even as the rupee itself stays weak.
- Total foreign capital inflows since RBI's special measures (announced early June 2026; swap window opened June 8, 2026): ~$32 billion
- Of this, ~$7 billion came via FPI into debt securities; the remainder chiefly via FCNR(B) deposits
- 2013 benchmark: ~$34 billion raised (Sept-Nov 2013) — ~$26-27 billion via FCNR(B) at a fixed swap rate of 3.5% for 3-year tenors, plus ~$7-8 billion via ECBs
- Rupee's 2013 record low: 68.85/USD (August 28, 2013, amid the "taper tantrum")
- Rupee's 2026 record low: ~96.90/USD
- India's April 2026 trade deficit: $28.4 billion; crude oil import bill for the month: ~$18.7 billion
- India imports over 88% of its crude oil requirement
- Mandatory one-year lock-in on deposits raised under the June 2026 special FCNR(B) swap scheme