Forex boost: RBI's special swap facility draws $40.8 bn in foreign inflows

India’s Reserve Bank of India (RBI) has reported a surge in foreign currency inflows under its special swap facility, reaching $40.816 billion by July 31, nearly doubling from $20.718 billion recorded just two weeks earlier on July 17. The increase reflects strong demand for the RBI’s concessional swap program, designed to attract foreign capital into the Indian economy. The facility, launched on June 8, 2026, has drawn significant participation from banks and financial institutions, with Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits forming the largest component of the inflows. By the end of July, FCNR(B) deposits alone accounted for $36.725 billion, representing approximately 90% of the total amount mobilized under the scheme. This was followed by Overseas Foreign Currency Borrowings (OFCBs) contributing $2.575 billion and External Commercial Borrowings (ECBs) adding $1.516 billion. Over the two-week period from July 17 to July 31, the total inflow surged by $20.098 billion, or roughly 97%, with FCNR(B) deposits seeing the largest jump, rising by $19.319 billion to reach $36.725 billion. Inflows via OFCBs grew by $605 million, while ECBs saw an increase of $174 million. The rapid growth in inflows highlights the effectiveness of the RBI’s measures to bolster India’s balance of payments and enhance foreign exchange liquidity. As of July 17, the total inflow stood at $20.718 billion, comprising $17.406 billion from FCNR(B) deposits, $1.970 billion from OFCBs, and $1.342 billion from ECBs. The sharp rise over the subsequent two weeks underscores the appeal of the concessional swap rates offered by the central bank, particularly among foreign investors seeking stable returns in a volatile global economic environment. The RBI introduced the special swap facility on June 5, 2026, as part of broader initiatives to stabilize the country’s external sector and manage capital flows amid global uncertainty. The program allows eligible entities to access foreign currency at preferential rates through FCNR(B) deposits, OFCBs, and ECBs. The central bank emphasized that these measures aim to strengthen India’s foreign exchange reserves and provide relief to borrowers looking to access international markets at lower costs. Under the current framework, the special window for new FCNR(B) deposits will remain open until September 30, 2026, while concessional swaps for OFCBs and ECBs will be available until December 31, 2026. This extended timeline provides ample opportunity for participants to benefit from the favorable terms offered by the RBI. Initial projections suggested the program could mobilize up to $70 billion in foreign exchange, but the current performance already exceeds expectations, indicating strong investor confidence in India’s economic outlook. The success of the facility has been attributed to several factors, including the attractive interest rates offered under the swap mechanism, the stability of the Indian rupee relative to other emerging market currencies, and the overall resilience of India’s macroeconomic fundamentals. Analysts suggest that the inflows will help cushion the domestic economy against potential shocks from global financial turbulence, providing additional liquidity to both corporate and retail sectors. The RBI has not indicated any immediate plans to alter the parameters of the swap facility, despite the rapid pace of inflows. Officials have stated that they will monitor the situation closely and make adjustments as necessary to ensure the program achieves its intended objectives. Meanwhile, financial institutions and investors continue to participate actively, leveraging the opportunity to secure funding at competitive rates while supporting India’s broader economic goals.