FCNR-B inflows had crossed $52 billion by August 14, with market participants expecting total inflows to reach $75 billion by the end of August.
Lenders are competing for foreign currency as demand for leveraged deposits outpaces dollar availability, with some banks offering leverage of up to 19X.
The inflows provide a near-term boost to India’s forex reserves, but large leveraged deposits could result in significant outflows when they mature or when the unusually high effective returns normalise.
Indian banks are scrambling to secure foreign currency non-resident bank (FCNR-B) deposits after the Reserve Bank of India (RBI) advanced the closure of a swap window to August 31, 2026, from its original September deadline.
The RBI's decision leaves lenders with just eight working days from August 20, 2026, to finalise transactions. The RBI stated that the encouraging response to the scheme prompted the early closure.
1 August 2026
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At least $52bn of inflows had entered the system through FCNR-B deposits as of August 14, 2026, according to RBI data reported.
Market participants expect total inflows to reach $75bn by the end of August. Lenders project at least $20bn will enter the market in the final eight days.
Experts say the RBI achieved its internal inflow target and closed the window early to prevent excess market liquidity.
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The Leverage Scramble
The sudden deadline shift has triggered intense demand for leveraged deposits. This demand is exceeding the supply of dollars, leading to waiting lists at several banks.
"Some banks are still in discussions with global lenders to raise funds that can be used to provide leverage to depositors through their GIFT City or overseas branches. Before, these banks had at least a month; now the time is cut down massively," a senior banker said.
HDFC Bank and ICICI Bank are offering at least 9X leverage. HSBC Bank is offering up to 19X leverage to attract depositors.
"The problem now is that the demand for leverage is more than the availability of dollars. So, you have eight working days' time, but many depositors are asking for leverage. There is a good waiting list in many banks," another banker said.
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The accelerated deadline caused a rush among depositors holding out for better yields, even those not seeking leverage. Axis Bank increased interest rates on FCNR-B deposits above $1mn to 6.40 per cent from 6.25 per cent. The lender now offers the highest rate among private banks for these deposits.
Yields and Outflow Risks
A significant share of these inflows comes through leveraged structures. These leveraged deposits are yielding effective returns of around 14-15 per cent for depositors.
These short-term gains carry risks for India's foreign exchange reserves. "Such deposits may not remain in India once the effective returns normalise," the banker said.
The current mobilisation is significantly higher than the 2013 FCNR-B scheme. That earlier programme brought in nearly $26bn.
The ongoing surge offers a short-term lift to the foreign exchange reserves of India. Lenders and analysts warn the high volume poses a risk of sizeable outflows when the deposits reach maturity.
