The Reserve Bank of India (RBI) on June 8 released a set of guidelines for authorised dealer banks to deal with foreign currency non-resident deposits of banks (FCNR-B) and for public sector enterprises that undertake external commercial borrowings (ECBs), as part of the central bank’s measures to shore up capital inflows.


As part of the guidelines for FCNR-B deposits, all authorised dealer banks which belong to Category I can utilise the swap facility given by the RBI.  The facility will remain open for deposits mobilised until September 30, according to the RBI notification.

Additionally, while deposits can be raised in any permitted foreign currency, the RBI's swap facility will be available only in US dollars. Under the arrangement, the bank can sell in multiples of $1 million, and simultaneously buy back the same amount at the end of the tenor period.

In the first leg, the bank will sell the US dollar under the FBIL reference rate and will buy back the same amount upon maturity on a spot basis.  The second leg of the swap will take place at the same exchange rate, meaning that there will be no swap premium. Banks are free to determine deposit rates according to their internal policies, as long as they are within the central bank’s existing interest-rate ceilings.

This swap facility comes into effect immediately and will remain open up to October 16 for deposits mobilised between June 8 and September 30, according to the notification.

As far as the ECB guidelines are concerned, the swap facility will operate slightly differently. The bank can sell US dollars and buy back the same amount at maturity. The swap will be undertaken at a fixed rate of 1.5 per cent per annum compounded semi-annually.  In the first leg of the transaction, the bank will sell US dollars under the FBIL reference rate. In the second leg, rupee funds have to be returned, along with the swap premium.

The swap facility for both ECB and overseas foreign currency borrowings comes into effect from June 8, but will remain open up to January 15, 2027, for eligible ECB drawdowns made and OFCB flows received up to December 31, according to the notification.

The RBI further clarified that banks need not calculate the positions arising from the special FCNR-B, ECB, and OFCBs as part of their net open position on the Indian rupee (NOP-INR) limit. This could mean that banks will now have greater flexibility in participating in these schemes without having to worry about their balance sheets.