RBI Swap Window Inflows Cross $143 bn | CLAT GK

CURRENT AFFAIRS | 23 SEPTEMBER 2026

On Monday, 21 September 2026 the Reserve Bank of India released fresh data on its special USD-INR foreign exchange swap facility, showing that cumulative inflows had reached US$143.596 billion as of 18 September 2026. The release — titled “Data on Forex inflows via FCNR(B) Deposits, External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) under Reserve Bank’s Swap facility”, press release number 2026-2027/1160 — breaks the total into US$132.980 billion through FCNR(B) deposits, US$5.320 billion through OFCBs and US$5.296 billion through ECBs.

The FCNR(B) figure carries an asterisk in the RBI’s own table: it covers deposits mobilised up to 31 August 2026, the date on which that leg of the window closed. As ANI reported, the revised FCNR(B) number is some US$5.754 billion higher than the provisional figure of US$127.226 billion published earlier, which is why the headline total has moved up by roughly US$7.22 billion from the provisional US$136.377 billion. The facility itself was announced on 5 June 2026 and operationalised on 8 June 2026; the ECB and OFCB windows remain open until 31 December 2026.

For an aspirant, the number is the least interesting part. What makes this examinable is the mechanism: a central bank deliberately subsidising dollar inflows to defend its currency, using an instrument — the currency swap — that most students can name but few can explain.

What a currency swap actually is

A foreign exchange swap is two transactions bolted together: a spot leg and a forward leg. A bank that has raised dollars sells them to the RBI today at the spot rate and receives rupees; simultaneously both sides agree that on a fixed future date the bank will buy those dollars back from the RBI at a pre-agreed rate. It is a buy/sell pair, not a loan. The RBI’s own FAQ on this facility describes it as “a plain buy/sell foreign exchange swap” covering only principal amounts, not interest.

The difference between the spot rate and the forward rate is the swap cost, normally set by the interest-rate differential between the two currencies. In a free market that cost is high for a rupee-dollar swap, because rupee interest rates exceed dollar rates. A concessional swap window means the central bank offers the swap at a rate below what the market would charge, absorbing the difference itself. That subsidy is the whole point: it makes it worthwhile for Indian banks to go abroad, raise dollars and bring them home.

FCNR(B), NRE, NRO — the distinction that gets tested

Three NRI deposit accounts are routinely confused, and the difference turns on currency of denomination and who bears exchange-rate risk.

FCNR(B) — Foreign Currency Non-Resident (Bank) — is a term deposit denominated in a foreign currency. The depositor puts in dollars (or another permitted currency) and is repaid in that same currency with interest. The depositor therefore faces no rupee exchange risk; the risk sits with the bank, or, under a swap window, with the central bank. NRE (Non-Resident External) accounts are rupee-denominated: foreign earnings are converted into rupees on deposit, so the depositor carries the currency risk, and the balances are freely repatriable. NRO (Non-Resident Ordinary) accounts are also rupee-denominated but are meant for income earned in India — rent, dividends, pension — and repatriation from them is restricted.

External Commercial Borrowings (ECBs) are a different animal altogether: commercial loans raised by eligible Indian entities from recognised non-resident lenders, governed by RBI directions under FEMA and subject to conditions on minimum average maturity, end-use and all-in cost. Overseas Foreign Currency Borrowings (OFCBs) are foreign-currency borrowings by banks themselves. The RBI’s FAQ indicates the facility was built around fresh FCNR(B) deposits with a minimum original tenor of three years and ECBs with an average maturity of three years and above.

Why a central bank subsidises dollars

Three motives overlap. The first is rupee defence. When the rupee is under depreciation pressure, the orthodox response is to sell dollars from reserves in the spot market — which works, but burns reserves and can invite speculation about how long the defence can last. A swap window instead attracts private dollars into the system, adding to supply without the central bank drawing down its stock.

The second is balance-of-payments strength. The RBI’s stated objective, quoted in reporting of the scheme, was “to strengthen our balance of payments and incentivise capital inflows”. Dollars raised through three-to-five-year FCNR(B) deposits and medium-maturity borrowings are stickier than portfolio flows, which can exit in days.

The third is reserve accumulation. The dollars the RBI takes in under the swap add to reserves for the life of the swap. There is a cost, and students should say it plainly: the concession is a real subsidy borne by the central bank, and the buy-back obligation is a future dollar outflow clustered on known maturity dates. The rupee leg also injects domestic liquidity, which the RBI then has to absorb — a textbook illustration of the impossible trinity, the proposition that a country cannot simultaneously have a fixed exchange rate, free capital movement and an independent monetary policy.

The 2013 comparison

The obvious precedent is 2013. With the rupee sliding after the US Federal Reserve signalled a tapering of asset purchases — the episode remembered as the taper tantrum — the newly appointed Governor Raghuram Rajan opened a concessional swap window allowing banks to swap dollars raised through fresh FCNR(B) deposits of three years and above into rupees at a fixed rate of 3.5 per cent a year, well below the prevailing market swap rate. A parallel window covered overseas borrowings by banks. Reported figures put the combined haul at roughly US$34 billion, of which about US$26 billion came via FCNR(B) deposits.

Set against that, the 2026 window is of a different order of magnitude. The comparison also flags the standard criticism: a large block of FCNR(B) money raised in one short window matures in one short window too, so the redemption is concentrated rather than spread. The maturity of the 2013 deposits three years later was watched closely for exactly that reason, and the same question — how a concentrated redemption is absorbed — will be asked of the 2026 cohort.

Reading it critically

The scheme’s defenders point to the outcome: FCNR(B) mobilisation of nearly US$133 billion against market estimates reported by Business Standard at US$90–100 billion, a stronger reserve position and a rupee shielded without a spot-market bloodbath. Sceptics make three points. The inflow is debt, not equity — it must be repaid. The concession is a subsidy whose cost is not always visible in headline numbers. And the surge of rupee liquidity created by the swaps has to be sterilised, complicating monetary policy at precisely the moment the central bank is managing inflation. Both readings are defensible, which is why this is a good essay and interview topic and a poor one for slogans.