RBI's Dollar Swap Schemes Gain Momentum as Banks Expect ECB Pick-Up Later This Year

Public sector banks expect external commercial borrowings (ECBs) to gather pace in the second half of the financial year, particularly during the October-December quarter, after reporting encouraging early interest in the Reserve Bank of India's (RBI) dollar swap schemes, according to a Moneycontrol report.

The outlook emerged after the heads of public sector banks briefed Finance Minister Nirmala Sitharaman on Monday about the progress of the RBI-backed facilities, which are aimed at attracting foreign currency inflows and strengthening India's external sector.

Sitharaman Reviews Progress

Sitharaman chaired a review meeting in New Delhi with the managing directors of public sector banks (PSBs) and public financial institutions (PFIs) to assess the implementation of the swap facility schemes covering Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs).

Senior officials attending the meeting included representatives from the Department of Financial Services, the Department of Economic Affairs, the Department of Revenue, the Chief Economic Advisor and the RBI's Deputy Governor.

The finance minister urged banks to step up their efforts in the months remaining before the schemes close. While the FCNR(B) deposit window remains open until September 30, 2026, the facilities for ECBs and OFCBs will continue until December 31, 2026.

Focus on Overseas Indian Deposits

Banks informed the government that the schemes have generated healthy interest among non-resident Indians (NRIs), particularly from financial centres such as Singapore, Hong Kong, the UK, the US and several countries in West Asia.

To sustain the momentum, Sitharaman asked lenders to deepen engagement with the Indian diaspora by expanding outreach initiatives and introducing innovative deposit products tailored to overseas investors.

According to the Finance Ministry, participation by public sector banks, private lenders and public financial institutions demonstrates the effectiveness of the swap facilities in attracting foreign currency resources, supporting India's foreign exchange reserves and strengthening the country's resilience against global financial uncertainties.

GIFT City to Play Larger Role

Banks also highlighted the growing role of International Banking Units (IBUs) operating from the International Financial Services Centre (IFSC) at GIFT City in Gujarat.

These units are helping mobilise funds from multiple overseas markets, including the United Kingdom, the United States, West Asia, Hong Kong, Singapore and Southeast Asia.

Sitharaman encouraged banks to make greater use of GIFT City's financial infrastructure and institutional ecosystem to widen access to international capital.

RBI Continues Support

Lenders said the suspension of the interest rate ceiling on fresh FCNR(B) deposits has enabled them to offer more attractive returns, including on five-year deposits, resulting in a noticeable acceleration in deposit mobilisation, as per the report.

The RBI Deputy Governor reiterated that the central bank will continue to assist participating banks and financial institutions in mobilising eligible deposits and borrowings under the schemes.

A daily reporting mechanism has also been put in place to enable real-time monitoring of fund mobilisation across participating institutions.

The RBI's package includes a dollar-rupee swap facility at par for fresh FCNR(B) deposits, along with concessional swap arrangements for eligible ECBs and OFCBs. The measures are intended to attract overseas capital, support the balance of payments and bolster India's foreign exchange reserves.