The swap window held the rupee and lifted reserves to a record $785.7 billion, but the dollars are owed back from 2029, nearly half in 2031. Reserves are down $51 billion in four weeks, the forward book is at $200 billion, and the maturity ladder is not published.
The RBI’s FCNR(B) Window Drew $133 Billion. Reserves Have Since Fallen $51 Billion From Their Peak, and the RBI’s Short Forward Book Passed $200 Billion
Between 8 June and 31 August, banks took about $133 billion of three-to-five-year dollar deposits from non-resident Indians and swapped them with the Reserve Bank of India. That is nearly five times the FCNR(B) money raised in the 2013 scheme that was its model. The rupee held, reserves hit a record of $785.7 billion on 4 September, and the RBI closed the window a month early.
Four weeks later reserves stood at $734.6 billion, $51 billion lower, and the RBI’s net short position in dollar forwards had passed $200 billion. The two facts belong together. The swap brings dollars in now and records a promise to deliver them back in 2029 to 2031 at today’s exchange rate. What the window bought is time, and the price is a forward liability that the RBI does not itemise.
How the window worked
| Feature | As reported |
|---|---|
| Who could use it | Banks taking fresh FCNR(B) deposits (renewals on maturity also eligible) from non-resident Indians in any freely convertible currency; deposits mobilised 8 June to 31 August 2026 (the end date was brought forward from 30 September) |
| Tenor and lock-in | Three to five years. A one-year lock-in; after that, banks may allow early withdrawal under their own policies. The swap itself cannot be cancelled or reversed before maturity |
| What the swap does | The bank sells the dollars to the RBI for rupees at the FBIL reference rate, on a par basis, and buys them back at the same rate at maturity; no ISDA agreement with the RBI is needed. Swaps could be executed with the RBI until 11 September |
| Who bears the exchange-rate risk | The RBI. Commentary puts the hedging cost the RBI absorbs at 280–300 basis points a year, on principal only; banks keep the interest risk |
| Reserve requirements | Fresh and renewed three-to-five-year deposits mobilised to 30 September 2026 exempt from CRR and SLR, under separate RBI amendment directions of 8 June 2026 (as summarised in legal newsletters), not under the swap circular itself |
| What depositors were paid | Reported rates of 5.5% to 7.1%, and up to 7.4% in some offers; banks cut rates after the window closed |
RBI press releases and the Finance Ministry statement (PIB 2302879) as described in press coverage; the circular is RBI/2026-27/99, FMOD.MAOG.No.S-56/01.06.016/2026-27, dated 8 June 2026; its terms above match the summary in the Foreign Exchange Dealers’ Association of India’s June 2026 newsletter, and the early close on 31 August its August 2026 newsletter, though the circular’s own text was not opened. Sources differ on closing dates and on some totals; the RBI’s own releases are followed where reported.
The point of the design is that a depositor earns the dollar interest rate, which was 5.5% to 7.4% in reported offers, with no exchange-rate risk, because the RBI has taken the risk. The RBI receives the dollars at once and sells them forward to the same banks at the same rate. The banks hold rupees, the RBI holds dollars, and nobody has to find a counterparty for a three-to-five-year hedge, which is not easy to buy.
What reserves did
Reserves rose from $666.9 billion in late June to $785.7 billion on 4 September, including a record weekly rise of $44.9 billion in the week after the window closed. Then they fell for four weeks: $4.9 billion, $14.9 billion, $18.3 billion and $13.0 billion. In the week to 2 October foreign currency assets fell $10.7 billion and gold $2.3 billion. Reserves are now just above the previous record of $728.5 billion set on 27 February, and still $67.7 billion above the June low.
The RBI does not split the weekly change between dollar sales and revaluation. One report says the RBI sold a net $22.4 billion between 11 and 25 September to defend the rupee; one analyst estimate puts the month’s net sales near $30 billion and valuation losses near $21 billion. Both are estimates from outside the RBI. The RBI Governor has said reserves remain adequate, at about 11 months of imports.
None of this means the window failed. The rupee traded between 94.3 and 96.6 to the dollar through August, against a record low of 96.96 in May, and the dollars bought that stability. But reserves counted in dollars include money that is owed back.
What the RBI owes
The RBI buys the dollars from the bank today and sells them to it later, so each swap adds to its short position in dollar forwards. That book was already at a record $106.7 billion at the end of May, from the RBI’s earlier defence of the rupee. It rose to $136.8 billion at the end of July and to $200.1 billion at the end of August, with the part maturing in more than a year almost doubling from $91.5 billion to $176.6 billion. The short-dated part is smaller than the headline: the RBI also holds long positions, and its net short in contracts under a year was only about $23.5 billion.
At the end of August the book was equal to about 27% of reserves ($200.1 billion against $740.8 billion on 28 August), a comparison that mixes two dates and is only a rough guide. The RBI’s own 2016 note on the 2013 scheme said the forward purchases largely front-run the swaps, so reserves would “witness significant accretions initially to be followed by depletions around maturity”. In 2013, banks raised about $34 billion, of which about $27 billion came through FCNR(B) deposits, mostly for three years, and the RBI said in 2016 it was fully prepared for maturity. The 2026 FCNR(B) money is nearly five times that and runs longer.
| Tenor | Share, as reported | Rough amount | Falls due |
|---|---|---|---|
| Five years | Nearly half (the RBI Governor) | About $65 billion | June to August 2031 |
| Three and four years | The remainder; split not published | About $65 billion | June 2029 to August 2030 |
This blog’s arithmetic: $133 billion of FCNR(B) deposits at 18 September, split by the Governor’s “nearly 50%” for five-year money. The tenor mix of the other half, and what share of renewals the RBI expects, is not public.
The Governor has said nearly half of the money is five-year. That pushes about $65 billion to mid-2031, with the rest from mid-2029 to mid-2030. Banks may offer to renew deposits at maturity, and renewals are eligible for the swap, so the RBI may not have to pay all of it out. Whether it will try to roll the money over, and on what terms, has not been said.
What it costs
The cost does not appear in a budget. The RBI sold dollars forward at today’s rate, so if the rupee is weaker at maturity the RBI will have given up the gain on those dollars, and if it is stronger the RBI gains. Each 1% fall in the rupee against the rate at inception is worth about $1.3 billion on $133 billion. The hedging cost the RBI is reported to absorb, 2.8% to 3.0% a year on the principal, would come to about $3.7 billion to $4.0 billion a year if applied to the whole sum. That is this blog’s arithmetic on the reported rate. One economist columnist puts the pressure on the external account at about $3.5 billion a year, or about $15 billion over the life of the deposits.
The swaps were struck near the rupee’s weakest levels of the year, and the RBI has called the rupee undervalued, as reported. If that is right, the position could end in a gain. If the oil-led pressure that opened the window persists, it will not. The accounts that would show which is happening are not published in any detail.
How it came together
| When | What |
|---|---|
| 5 Jun 2026 | RBI Governor announces the swap facility |
| 8 Jun 2026 | Facility opens; reserves bottom at $666.9 billion in the week to 26 June |
| 13 Aug | FCNR(B) deposits reach $52.3 billion |
| 14 Aug | RBI brings the end of the FCNR(B) window forward from 30 September to 31 August |
| 31 Aug | Window closes: $127.2 billion of FCNR(B) deposits, $136.4 billion across all channels |
| 4 Sep | Reserves peak at $785.7 billion after a record weekly rise of $44.9 billion |
| 11 Sep | Last date to swap deposits with the RBI |
| 18 Sep | RBI figures: $133.0 billion of FCNR(B) deposits, $143.6 billion in all |
| 30 Sep | Press reports: RBI’s net short forward book at $200.1 billion at end-August |
| 2 Oct | Reserves $734.6 billion, fourth weekly fall, $51.1 billion below the peak |
| 31 Dec 2026 | Facility closes for external commercial borrowings and banks’ overseas foreign-currency borrowings |
| June 2029 to Aug 2031 | FCNR(B) deposits under the facility fall due |
What would fix this
- The Reserve Bank of India should publish the swap book each month by year of maturity, separately from its other forward positions, with the tenor mix, so that the 2029 to 2031 repayments can be seen in its own forward-book release.
- The Reserve Bank of India should publish net spot intervention and valuation change next to the weekly reserves figure, so a fall such as the $51 billion since 4 September can be split between dollar sales and revaluation.
- The Reserve Bank of India should state its policy on rollover and early withdrawal: whether it will invite renewals, and what happens to a swap that cannot be cancelled when a depositor leaves after the one-year lock-in.
- The Reserve Bank of India should report in its annual accounts how it values the swap position and any hedging cost it absorbs, so the cost is recognised when it arises and not at maturity.
- The Department of Economic Affairs should add reserves net of the forward book, and the scheduled FCNR(B) repayments, to its external-sector tables and the annual Economic Survey, so reserve adequacy is shown after the liability as well as before it.
These are proposals from this blog, not recommendations any agency has adopted.
Sources and caveats
Finance Ministry statement on the swap facility (25 August 2026, PIB 2302879), titles and dates from this blog’s PIB index; RBI circular RBI/2026-27/99 (FMOD.MAOG.No.S-56/01.06.016/2026-27, 8 June 2026), as summarised in FEDAI’s newsletters of June and August 2026 (fedai.org.in); PIB pages and the circular’s own text could not be opened from this blog’s tools. RBI releases on cumulative inflows ($127.2 billion FCNR(B) and $136.4 billion in all at 31 August; $133.0 billion and $143.6 billion at 18 September) and the weekly reserves figures (21 August to 2 October) are as reported by Business Standard, BusinessToday, PTI, Free Press Journal, The Daily Jagran and others; the RBI weekly statistical supplement was not read. Some trade posts give much lower totals for dates in August; the RBI figures are used. The forward-book figures ($106.7 billion at end-May, $136.8 billion at end-July, $200.1 billion at end-August with $176.6 billion over one year, and the short-dated net of $23.5 billion) are from Business Standard and Bloomberg of 30 September and 31 August, as seen in search summaries, not from the RBI bulletin; the June figure was not found. The scheme’s terms are from law-firm and trade summaries, the RBI’s press release for the dates, and this blog’s earlier piece for the CRR and SLR exemption. The 280–300 basis point hedging cost is from one law-firm note; the $3.5 billion a year and $15 billion estimates are one columnist’s. The Governor’s remark that nearly half the deposits are five-year, and that the rupee is undervalued, are as reported. The analyst split of the month’s reserve fall and the RBI’s $22.4 billion of dollar sales are estimates from press reports. The 2013 and 2016 figures are from press coverage and an RBI release on the 2013 scheme’s maturity. Arithmetic (ladder, 27% ratio, cost per 1% and per year) is this blog’s and rests on the stated assumptions. This article does not say the scheme was a mistake.
About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.
