FCNR(B) scheme an insurance policy but repayment needs plan: Uday Kotak
Why in the news
On 26 October 2026, Kotak Mahindra Bank founder Uday Kotak described the RBI’s FCNR(B) deposit scheme as a strong insurance policy for India. He also warned that the country must plan for repaying these deposits when they mature.
Key facts
- Event: Business Standard BFSI Insight Summit 2026, Jio World Convention Centre, Mumbai.
- Amount raised: more than $130 billion, by Kotak’s estimate.
- Repayment burden: about $160-170 billion once interest is added.
- RBI credit: he said the scheme was well timed and was rightly closed on 31 August, before US bond yields jumped in September.
- Breathing space: he said the funds give India three to five years to strengthen its economic and financial position.
- Yield gap: a hedged US 10-year bond return of about 8.5% in rupee terms compares with an Indian 10-year G-sec yield of about 7.4%.
Kotak’s external-sector estimates
| Item | FY26 (ended March 2026) | FY27 (projection) |
|---|---|---|
| Current account deficit | $26 billion | – |
| Gold imports | $72 billion | up to $90 billion |
| Oil imports | – | $60-65 billion |
He noted that without gold imports, the current account would have shown a surplus in FY26.
About FCNR(B) deposits
FCNR(B) stands for Foreign Currency Non-Resident (Bank) deposits. They are fixed-term deposits of one to five years that NRIs hold in convertible foreign currencies with Indian banks. Depositors are shielded from rupee depreciation, and the inflows add to India’s forex reserves. Kotak said building such dollar buffers was the right move amid the Middle East and Russia-Ukraine conflicts.
Exam angle
- Know the full form of FCNR(B) and how it supports forex reserves.
- Link gold imports to the current account deficit and rupee pressure.
- Note the 31 August closing date of the scheme.