RBI Rolls Out Dollar Swap Facility to Attract Foreign Currency

The Reserve Bank of India (RBI) on Friday announced several measures aimed at attracting foreign currency inflows and strengthening the rupee. Among the key steps, the central bank introduced a dollar-rupee foreign exchange swap facility for fresh FCNR(B) deposits with maturities ranging from three to five years.

The move comes at a time when India has been witnessing significant foreign capital outflows, putting pressure on the rupee, which has depreciated by more than 6% in the first six months of 2026. The Indian rupee was also the worst-performing currency in 2025, having fallen nearly 10% against the US dollar.

The ongoing conflict in West Asia has further rattled investor sentiment, prompting investors to pull money out of Indian financial markets and shift funds to traditional safe-haven assets such as the US dollar and gold.

What Are the New Measures?

Under the announced swap facility, banks can sell US dollars to the RBI in multiples of $1 million and buy back the same amount at the end of the swap period. This inflow of dollars helps bolster the central bank's foreign exchange reserves, easing pressure caused by market interventions.

Geopolitical uncertainty, foreign portfolio investor (FPI) outflows, and elevated crude oil prices have placed the rupee under significant pressure, forcing the RBI to sell dollars in the foreign exchange market to limit the pace of depreciation and prevent the currency from moving towards the psychologically important ₹100-per-dollar mark.

The swap facility will be available to Authorised Dealer (AD) Category-I banks for fresh FCNR(B) deposits mobilised in freely convertible foreign currencies.

An FCNR(B), or Foreign Currency Non-Resident Bank account, is a fixed deposit account that allows Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) to hold overseas earnings in foreign currency within India.

These deposits are attractive because they are protected from exchange-rate fluctuations, as the funds are maintained and earn interest in the original foreign currency. Interest earned on FCNR(B) deposits is also exempt from tax in India.

"The underlying deposits will have a lock-in period of one year. Banks may, at their discretion, allow premature withdrawal of such deposits after one year, in accordance with their internal policies," the RBI said. However, the swap undertaken with the RBI cannot be cancelled before maturity.

According to reports, the move is expected to enable banks to offer non-resident Indians (NRIs) deposit rates that are 150-200 basis points (bps) higher than current levels.