RBI USD-INR Swap Window at 1.5% Fixed Cost for Banks, PSUs
Why in the news
Following Governor Sanjay Malhotra’s June 2026 monetary policy statement, the RBI put a dollar-rupee swap window into operation. It offers banks and PSUs cheaper currency hedging to encourage foreign-currency borrowing.
Key facts
| Feature | Detail |
|---|---|
| Type | USD-Rupee buy-sell swap |
| Cost | 1.5% per annum, fixed, compounded semi-annually |
| Tenor | Up to 5 years; minimum 3 years |
| Users | PSUs raising ECBs; banks raising OFCBs |
| Deadline | ECBs drawn till 31 December 2026 |
| Also open to | Undrawn portions of existing ECBs |
| Market hedging cost | 3.5% to 4% |
How the swap works
- A bank turns its borrowed dollars into rupees by selling them to the RBI now.
- It agrees to buy back the same dollar amount at the end of the term, up to 5 years.
- The buy-back rate is fixed beforehand, so the bank is protected from rupee depreciation.
Why it matters now
- The rupee has been weakening and FPI outflows have hit markets.
- RBI wants more dollars to come in to steady the rupee and build forex reserves.
- Cheaper hedging encourages PSUs and banks to borrow more abroad, aiding the balance of payments.
Key terms
- FX swap: exchange of currencies now with a pre-agreed reversal later.
- ECB: foreign-currency loans taken by Indian entities from overseas lenders, under RBI rules.
- OFCB: a special category of foreign-currency borrowing by banks to fund overseas operations or lending.
- Forex reserves: central bank’s stock of foreign currency, gold, IMF reserve position and SDRs.
Exam angle
- Issuer: RBI; headline rate 1.5% fixed.
- Beneficiaries: PSU ECBs and bank OFCBs, minimum 3-year maturity.
- Related terms: hedging, FX swap, balance of payments.