RBI’s great dollar haul: Where are the $73 billion going?
India has mobilised roughly $73 billion in foreign currency inflows in under 11 weeks, largely through FCNR(B) deposits
The rupee has remained range-bound near ₹95-96 per US dollar despite the scale of inflows
The inflows are assessed as primarily strengthening the Reserve Bank of India's foreign exchange buffers rather than being deployed to push the currency stronger
The scale of mobilisation is being compared to earlier RBI currency-defence episodes
FCNR(B) Deposits — Foreign Currency Non-Resident (Bank) Scheme
FCNR(B) is a term deposit scheme introduced by the RBI in 1993, allowing Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs) to hold fixed deposits in India denominated in foreign currency rather than rupees. Unlike the earlier FCNR(A) scheme (where the RBI itself bore the exchange-rate risk), under FCNR(B) the exchange risk is borne by the depositing bank, not the RBI.
Key Details
- Introduced: May 1993, replacing the FCNR(A) scheme
- Available currencies: major convertible currencies including USD, GBP, EUR, JPY, AUD, CAD
- Tenure: minimum 1 year, maximum 5 years
- Interest income is fully exempt from Indian income tax as long as NRI/PIO status is maintained under FEMA; principal and interest are fully repatriable
A special RBI swap window (introduced via circular in mid-2026) allowed banks to offer NRIs elevated FCNR(B) interest rates (up to ~7% per annum) with no currency risk to the depositor, driving the surge in inflows referenced in the report.
RBI Foreign Exchange Reserves and Their Composition
India's forex reserves are held by the RBI and comprise four components under the RBI Act, 1934 and FEMA framework: Foreign Currency Assets (FCA, the largest component), Gold, Special Drawing Rights (SDRs) with the IMF, and India's Reserve Tranche Position (RTP) at the IMF. Reserves are used to defend the currency during volatility, ensure import-cover adequacy, and meet external debt obligations, but are not typically deployed to actively appreciate the currency.
Key Details
- Four components: Foreign Currency Assets, Gold, SDRs, Reserve Tranche Position (IMF)
- RBI reserves crossed roughly $700-717 billion through August 2026, among the highest levels on record
- A standard prudential benchmark is import cover (months of imports the reserves can finance); reserve adequacy is also assessed via the ratio of reserves to short-term external debt
- The RBI intervenes in the spot and forward forex markets to manage volatility, not to target a specific exchange rate level (India follows a managed float, not a fixed peg)
The mobilised FCNR(B) dollar inflows are being absorbed into RBI's reserve stock rather than being sold into the market to strengthen the rupee, consistent with a strategy of buffer-building rather than active currency appreciation — explaining why the rupee stayed range-bound near ₹95-96 despite the large inflow.
Historical Precedent — 2013 FCNR(B) Swap Window
The RBI has used special FCNR(B) swap windows before to defend the rupee during periods of capital account stress, most notably in 2013 during the "Taper Tantrum," when then-Governor Raghuram Rajan's RBI opened a swap facility that mobilised about $34 billion from NRI deposits within a few months, credited with stabilising the rupee that year.
Key Details
- 2013 FCNR(B) swap window: ~$34 billion raised, credited with easing rupee depreciation pressure during the Taper Tantrum
- The 2026 episode has mobilised a larger sum (~$73 billion) in a shorter window (under 11 weeks), reflecting both a larger economy and more aggressive incentive structuring
- Both episodes used the same underlying instrument (FCNR(B) deposits) but different mechanics — the 2013 window offered RBI-subsidised swap costs, while contemporary schemes have similarly used special swap facilities to make dollar deposits attractive to NRIs
The comparison with 2013 frames the current episode as one of India's largest-ever NRI-deposit-driven reserve-building exercises, testing students on the RBI's toolkit for managing external sector stress beyond conventional interest rate policy.
- Foreign currency mobilised: ~$73 billion in under 11 weeks (2026), primarily via FCNR(B) deposits
- Rupee level: range-bound near ₹95-96 per US dollar through the mobilisation period
- RBI forex reserves: approximately $707-717 billion as of August 2026 (weekly RBI data)
- 2013 precedent: ~$34 billion mobilised via an FCNR(B) swap window during the Taper Tantrum
- FCNR(B) scheme introduced: May 1993; tenure 1-5 years; interest tax-exempt for NRIs under FEMA