FCNR(B) Swap Facility: RBI Window to Draw NRI Deposits
Why in the news
The Finance Minister checked progress of the RBI’s special swap window and asked banks to reach more NRIs, so India can gather foreign currency and bolster reserves.
About FCNR(B)
- A term deposit in foreign currency, regulated by the RBI, open to NRIs and PIOs.
- Tenure: 1 to 5 years; currencies include USD, GBP, EUR, JPY, AUD and CAD.
- Principal and interest are fully repatriable; depositors bear no exchange-rate risk.
- Aims: raise foreign currency deposits, strengthen forex reserves, reduce external vulnerability.
How the swap works
| Step | What happens |
|---|---|
| 1 | NRIs deposit foreign currency with Indian banks |
| 2 | Banks swap that currency with the RBI |
| 3 | RBI provides rupees at a concessional swap cost |
| 4 | Transaction is reversed at maturity |
The window also covers eligible overseas borrowings and lowers banks’ currency risk and funding cost.
Related terms
- ECB: loans from foreign lenders to eligible Indian entities for infrastructure, capex and expansion; RBI-regulated.
- OFCB: foreign currency borrowings by eligible Indian financial institutions abroad.
Exam angle
- Regulator: RBI. Holders: NRIs and PIOs. Tenure: 1-5 years.