The Reserve Bank of India has made a set of major changes to its foreign exchange rules. The main aim is simple: bring more foreign currency into India and give banks more room to use those funds.
The move comes at a time when the Indian rupee has faced pressure against the US dollar. Oil prices, global capital flows and tension in world markets have all added pressure to India’s external position.
The RBI’s latest steps focus mainly on Foreign Currency Non-Resident, or FCNR(B), deposits. These are fixed deposits that non-resident Indians can hold in foreign currencies through Indian banks.
The new measures give banks a special forex swap facility, more freedom to lend against eligible FCNR(B) deposits and relief from some regulatory requirements. Together, these steps are meant to make it easier for banks to attract foreign currency from overseas.
What Exactly Has Changed?
On June 8, 2026, the RBI introduced a US dollar-rupee forex swap facility for fresh FCNR(B) deposits with a maturity of three to five years. The facility is available to authorised dealer Category-I banks. Deposits can be in any freely convertible currency, but the swap with the RBI takes place in US dollars.
The basic idea is easy to understand. A bank attracts dollars or another foreign currency from an NRI and places that money in an FCNR(B) deposit. The bank can then use the RBI swap facility to get rupees against the foreign currency.
At the end of the swap period, the bank returns the rupees and gets back the foreign currency at the agreed terms. This reduces the bank’s currency risk on the deposit.
The swap facility covers eligible fresh FCNR(B) deposits with a three-year minimum and five-year maximum maturity. The special window applies to deposits mobilised from June 8 to September 30, 2026.
Why Banks Have a Reason to Like This Rule
Foreign currency deposits can create a currency risk for banks. If a bank takes dollars but needs rupees for its business, it has to manage the exchange rate risk.
The RBI’s special swap facility helps reduce that problem. It gives banks a clearer way to convert the foreign currency into rupees without taking the same level of open currency risk.
The RBI also allowed banks to keep the positions from these special FCNR(B), external commercial borrowing and overseas foreign currency borrowing swaps outside certain net open position calculations. A later RBI clarification also allowed banks to exclude hedged positions linked to these transactions from the relevant open position calculations.
There is another important benefit. Fresh FCNR(B) deposits with a maturity of three to five years, raised during the special period, are exempt from CRR and SLR requirements. This gives banks greater use of the money and lowers the regulatory cost linked to these deposits.
Banks Can Also Give Loans Against These Deposits
The RBI later clarified another part of the scheme that matters to both banks and NRIs.
Indian banks, as well as their overseas branches, can give loans to non-residents against eligible FCNR(B) deposits raised under the June 8 scheme. Banks can also issue a Standby Letter of Credit, or SBLC, in favour of overseas lenders against such deposits.
A bank can place a lien on the FCNR(B) deposit as security for the loan. This means the depositor does not have to break the deposit just to get access to funds.
The RBI has also clarified that its special forex swap covers the principal amount of the eligible deposit. It does not cover the interest part of the deposit.
A New Relief for Priority Sector Rules
Another major change came in August.
The RBI said loans against fresh FCNR(B) and NRE term deposits raised during the special period will not form part of net bank credit for the purpose of priority sector lending calculations.
For FCNR(B) deposits, the relevant period is June 8 to September 30, 2026. This means banks can give loans against these deposits without those loans adding to the base used for their mandatory priority sector lending calculations.
This matters because banks have fixed targets for priority sector lending. Such targets require banks to direct a certain share of credit toward areas such as agriculture, micro and small businesses, education, housing and other eligible sectors.
The new relief removes one regulatory concern for banks. It can make loans against these foreign currency deposits more attractive from a balance-sheet point of view.
The Numbers Show Why RBI Took This Step
The early response to the new scheme has been strong.
By July 17, 2026, the RBI’s measures had attracted $20.72 billion in foreign currency, with about $17.5 billion of that amount from FCNR(B) deposits.
By July 31, the total inflow through the FCNR(B) drive had reached $36.7 billion. India’s foreign exchange reserves stood at $692.9 billion as of July 31, up by almost $10.5 billion from the previous week. This was the biggest weekly increase in six months.
The stock of FCNR(B) deposits also rose sharply. Data cited by Reuters showed that foreign currency non-resident bank deposits increased from $32.56 billion on June 5 to $60.55 billion by July 30.
HSBC’s India unit raised about $6.14 billion under the scheme. State Bank of India raised about $4.12 billion, while ICICI Bank raised about $3.7 billion. HDFC Bank and Axis Bank each raised about $1.5 billion.
These numbers show that the RBI’s offer has received a much stronger response than many expected.
What Does This Mean for the Rupee?
A country needs foreign currency for many important payments. India uses dollars and other currencies to pay for crude oil, machinery, technology, imports and other overseas needs.
More foreign currency in the banking system can improve India’s external position. It also gives the RBI more room to manage periods of heavy pressure on the rupee.
India’s reserves of $692.9 billion give the central bank a large buffer. RBI Governor Sanjay Malhotra said the reserves provided more than 10 months of import cover and covered 90.8% of external debt.
The rupee also gained 1.2% in the week covered by the latest reserve data. It reached Rs 95.38 per US dollar, its strongest weekly rise in four months.
That does not mean the new rules alone caused the rupee’s move. Currency rates depend on many factors, such as oil prices, US interest rates, foreign investment and global risk sentiment. But stronger foreign currency reserves give India more protection when market pressure rises.
What It Means for NRIs
For NRIs, the changes create another reason to consider FCNR(B) deposits, especially for those who want to keep savings in a foreign currency while using an Indian bank.
An FCNR(B) deposit can protect the depositor from direct rupee exchange risk because the deposit remains in a foreign currency. The interest and principal can also be repatriated under the applicable rules.
The new scheme also gives banks more room to offer products around these deposits. The ability to take a loan against an eligible deposit can provide liquidity without the need to close the deposit early.
However, the exact interest rate, loan rate and other terms will depend on the bank and the product. The RBI framework does not mean every bank must offer the same rate or loan terms.
This Is More Than a Bank Rule
The latest forex measures are part of a wider effort by the RBI to improve India’s foreign currency position.
The central bank is not simply asking banks to collect more dollars. It has also reduced some of the costs and risks that can stop banks from accepting these deposits.
The special swap facility, CRR and SLR relief, loan flexibility and priority sector relief all work toward the same broad goal: make foreign currency inflows more attractive for Indian banks.
The results so far are notable. FCNR(B) deposits have risen sharply, total inflows have reached $36.7 billion, and India’s reserves have moved back toward the $700 billion mark.
For ordinary bank customers, the changes may not create an immediate difference in day-to-day transactions. But for NRIs, banks, importers, exporters and companies with foreign currency needs, the impact can be much more direct.
The Bigger Picture
India’s foreign exchange position is one of the key protections for the economy. A large reserve gives the RBI more strength when the rupee faces sudden pressure.
The new forex rules are therefore less about a single banking change and more about building a stronger foreign currency buffer.
The RBI has created a limited window for banks to attract long-term foreign currency deposits. The strong response so far suggests that banks and overseas depositors see value in the offer.
If the inflows remain strong, India could gain a larger reserve cushion and better protection against future external shocks. For banks, the rules offer more flexibility. For NRIs, they create more options. And for the wider economy, more foreign currency can provide an important layer of stability when global markets become difficult.
