Mumbai, August 5: The Governor of the Reserve Bank of India (RBI), Sanjay Malhotra, stated on Wednesday that there is currently no proposal to prematurely close the Foreign Currency Non-Resident (Bank) or FCNR(B) deposit incentive scheme. This announcement was made during a press conference following the monetary policy review. He indicated that the scheme will continue for its designated period.
This initiative has led to a significant inflow of foreign capital into the country. As of July 31, 2026, Indian banks have raised $36.7 billion through FCNR deposits. This influx has strengthened the rupee at a time when rising crude oil prices have been putting pressure on it in global markets.
Experts believe that due to substantial investments in FCNR deposits, India’s foreign exchange reserves could surpass the historic level of $700 billion in the coming weeks.
The RBI’s zero-cost swap facility is also fully operational and will remain in effect until its scheduled end date of September 30, 2026.
Sanjay Malhotra remarked, “Even before these measures were implemented, India’s external financial position was quite robust and satisfactory. These steps have further strengthened it.”
He further stated that the RBI’s policy has always been to allow the market to determine the value of the rupee within a defined range. The central bank does not target any specific exchange rate.
The RBI Governor noted, “We only intervene when there is excessive volatility in the market or when speculative pressures begin to rise rapidly.”
He assured that the central bank will strive to maintain stability in the rupee’s movement to prevent unusual or disruptive fluctuations in the exchange rate and to avoid unnecessary speculation in the market.
Major commercial banks in the country, including the State Bank of India (SBI) and ICICI Bank, have successfully attracted more than half of the total investments under this FCNR(B) special dollar-raising initiative.
To attract more funds from abroad and strengthen foreign exchange reserves, the RBI temporarily relaxed some interest rate restrictions on deposit schemes for Non-Resident Indians (NRIs), allowing banks to offer higher interest rates on new FCNR(B) and NRE deposits.
Under these rules, effective until September 30, 2026, the RBI has removed the maximum interest rate cap on new FCNR(B) deposits with a maturity of more than three years and up to five years. Additionally, restrictions related to interest rates on new Non-Resident External (NRE) deposits with a maturity of three years or more have also been lifted.
This decision gives banks the freedom to offer more attractive interest rates to NRIs, enabling them to raise more foreign currency and rupee deposits from Indians living abroad and other investors.
Previously, banks were required to ensure that the interest rates offered on NRE deposits did not exceed those of domestic fixed deposits of the same duration. There was also a limit on the interest rates for FCNR(B) deposits with maturities of three to five years, which was determined by adding 350 basis points to the applicable reference rate or swap rate.
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