RBI’s Concessional Swap Scheme for PSUs and NRI Deposits

Economic uncertainty has increasingly become a defining feature of the global financial environment. Geopolitical tensions, changing interest rate cycles, and volatile international capital flows can significantly impact domestic economies.

For India, maintaining adequate foreign exchange reserves and ensuring stability in the rupee remain key priorities in managing external sector risks. The Reserve Bank of India (RBI) has consistently adopted measures aimed at strengthening foreign currency inflows and enhancing resilience against global financial disruptions.

What Is a Concessional Foreign Exchange Swap?

A concessional foreign exchange swap is a mechanism through which the RBI provides favourable swap terms to eligible entities, enabling them to convert foreign currency into Indian rupees at a lower cost than prevailing market arrangements.

By reducing hedging costs, such facilities encourage foreign currency inflows, support exchange rate stability, and strengthen India’s foreign exchange reserves.

RBI’s June 2026 Concessional Swap Facility

Recognising the potential of this mechanism to attract stable foreign currency inflows, the RBI introduced special concessional foreign exchange swap facilities in June 2026 to strengthen India’s foreign exchange reserves and support the external sector amid global economic uncertainties.

Eligible Instruments and Swap Terms

The facilities primarily cover two categories of foreign currency inflows:

• Eligible Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits mobilised by banks — authorised dealer banks can swap foreign currency received from these deposits with the RBI at concessional terms.
• Eligible External Commercial Borrowings (ECBs) raised by Public Sector Undertakings (PSUs) — these can be swapped at a concessional premium of 1.5% per annum, significantly below prevailing market rates.

Benefits for Banks and PSUs

For eligible FCNR(B) deposits, the facility enables participating banks to reduce hedging costs, which may provide greater flexibility in offering competitive deposit rates, subject to applicable regulatory requirements.

This could encourage greater participation in FCNR(B) deposits and increase foreign currency inflows into the banking system. Similarly, the facility provides PSUs with access to relatively cheaper foreign currency funding, supporting their external borrowing requirements.

Scheme Timeline and Deadlines

The scheme is temporary in nature. The key deadlines are as follows:

• FCNR(B) deposits mobilised between 8 June and 30 September 2026 can access the swap window until 16 October 2026.
• PSU ECB drawdowns made up to 31 December 2026 may utilise the facility until 15 January 2027.

Complementary Regulatory Measure: CRR and SLR Exemption

Alongside this initiative, the RBI introduced a related regulatory measure exempting eligible fresh FCNR(B) deposits with original maturities of three to five years from the maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements for specified categories of banks, in accordance with the applicable regulatory framework.

The measure is intended to reduce the regulatory cost of mobilising such deposits and encourage greater foreign currency inflows.

Conclusion

The RBI’s concessional foreign exchange swap scheme represents a targeted policy intervention aimed at strengthening India’s external sector, improving foreign exchange reserves, and supporting overall financial stability during periods of global uncertainty.

The facilities provide cheaper funding avenues for banks and eligible PSUs while encouraging foreign currency inflows through concessional swap arrangements.

When read alongside the accompanying regulatory measures, the initiative reflects the RBI’s broader objective of facilitating foreign currency inflows, maintaining financial stability, and enhancing India’s resilience against external economic shocks.

Last Updated on 16 July, 2026