RBI MAY REINTRODUCE FCNR-B DEPOSITS TO SUPPORT RUPEE

The Reserve Bank of India may introduce incentives for non-resident Indian (NRI) deposits in its upcoming April Monetary Policy Committee (MPC) review to counter further depreciation in the rupee, Moneycontrol.com reported, citing experts.

While specific details are yet to be finalised, sources indicated that the central bank could revive the foreign currency non-resident (FCNR-B) deposit route to attract overseas inflows and help stabilise currency volatility.

Notably, the United Arab Emirates accounts for over 40% of FCNR-B deposits held with Indian banks, highlighting a significant concentration of such inflows from the Gulf region.

The proposed move comes amid a sharp decline in FCNR-B inflows. According to a Macquarie Capital report based on RBI data, NRI deposits fell nearly 26% to $14.35 billion during April 2025–January 2026. FCNR-B inflows dropped even more steeply to $0.94 billion in the same period, compared with $7.02 billion a year earlier, underscoring the urgency to revive these flows.

“The RBI needs to engineer more sustainable inflows to mitigate depreciation pressure and accommodate a higher fuel import bill,” Lavanya Venkateshwaran, Senior Economist at OCBC Bank, told Moneycontrol.com.

Move aimed at stabilising the rupee

The rupee has weakened sharply since the onset of the West Asia conflict in late February, declining nearly 3%. FY26 marked one of the currency’s weakest years in a decade, with a depreciation of nearly 10%, much of it occurring after the geopolitical tensions escalated.

Although the RBI recently introduced measures to curb speculative activity in offshore forward markets, market participants believe additional steps may be needed to counter sustained external pressures.

If implemented, the FCNR-B route would mark a return after nearly 13 years. The RBI had last deployed a similar tool in 2013 following the taper tantrum, when it opened a special swap window to attract FCNR-B deposits.

At that time, banks were allowed to swap US dollar deposits of three years or more at a concessional rate of 3.5%, significantly below market rates. The move brought in nearly $30 billion in inflows and helped stabilise the rupee.

Market participants now expect a comparable intervention.

“If rupee weakness persists, policies such as subsidised FCNR(B) swap windows—similar to those used in 2013—could be revisited, although the cost would be higher given current global interest rates,” Michael Wan, Senior Economist at MUFG Bank, told Moneycontrol.com.

Policy outlook

According to a poll, the RBI is widely expected to keep interest rates unchanged in its April 8 policy decision. Investors will also closely track the central bank’s FY27 projections for growth and inflation, along with any signals on liquidity management measures.

2026-04-07T05:08:59Z