Business

RBI’s FCNR(B) rule ‘data-driven’ or policy U-turn?

By Sohail Khan 20 August 2026, 8:50 am

Benchmarks
Nifty24,078.30-76.61

FEATURED FUNDS★★★★★

Motilal Oswal Midcap Fund Direct-Growth

5Y Return
23.26 %

Invest Now

Enter search text:

Business News›News›Economy›Policy›RBI's early FCNR(B) deposit scheme closure 'data-driven' or a policy U-turn? Governor Malhotra explains

Read Today's Paper

RBI's early FCNR(B) deposit scheme closure 'data-driven' or a policy U-turn? Governor Malhotra explains

Synopsis

RBI Governor Sanjay Malhotra defended the FCNR(B) deposit scheme's early closure. He stated the decision was data-driven and a prudent calibration. This move aims to attract $80 billion into India's economy. The central bank cited stronger than expected dollar inflows for the adjustment. The RBI remains committed to managing exchange rate volatility and market conditions.

Reserve Bank of India (RBI) Governor Sanjay Malhotra attends a press conference after a monetary policy review in Mumbai Foreign Currency Non-Resident (Bank), or FCNR(B) deposit scheme for NRI — Reserve Bank of India (RBI) Governor Sanjay Malhotra defends decision on early withdrawal of FCNR(B) deposit scheme for NRIs

Reserve Bank of India (RBI) Governor Sanjay Malhotra asserted that the decision to advance the closure of Foreign Currency Non-Resident (Bank), or FCNR(B) deposit scheme by a month was 'data-driven and caliberated'.

In an interview with the Financial Express, he said that it will not be correct to call it a U-turn; it is rather a calibration as the move demonstrated the central bank’s ability to remain flexible and data-dependent amid rapidly changing conditions.

Defending the central bank's decision, Malhotra described it as a well-thought-out, calibrated, prudent and data-driven response to evolving conditions.

“I would like to highlight the use of the words ‘as of now’ when I mentioned that there was no proposal to advance the last date,” he said, adding that the central bank had also said it would keep stakeholders informed of any decision, clearly indicating that an early closure had not been ruled out.

According to Malhotra, the policymakers took the decision from a position of strength.

$80 billion forex overhaul

The RBI expects the three schemes—FCNR(B), overseas foreign currency borrowings (OFCBs) and external commercial borrowings (ECBs) to attract at least $80 billion to India's pocket. This policy plan reflects the country’s strong macroeconomic fundamentals and would further strengthen its balance of payments, he told the publication.

The central bank introduced the special window after global uncertainty and capital outflows pressurised the rupee. Besides the swap facility, it also relaxed pricing norms, allowing banks to offer higher interest rates on eligible FCNR(B) deposits. Several lenders, including Indian Bank, HDFC Bank and ICICI Bank, have since raised FCNR(B) deposit rates to attract more NRI money.

Also read: Will FCNR (B) deposit scheme end? RBI Governor said this at MPC

Unveiling the NRI deposits scheme, the RBI had previously said the measures are aimed at encouraging durable foreign currency inflows rather than short-term capital, with the FCNR(B) deposits carrying a mandatory one-year lock-in under the special facility.

The RBI later announced advance withdrawal of the scheme citing stronger than expected dollar inflows.

“There is a diminishing marginal utility of every dollar that is swapped. At the same time, there is an increasing marginal cost because you need to sterilise it for a longer period,” Malhotra said.

The central bank allowed more than two weeks time to stakeholders to make the necessary arrangements and benefit from the scheme during the remaining period, which the RBI considered sufficient, he said on concerns around the sudden nature of the announcement.

Malhotra further added that the decision to close the temporary facility early was part of the RBI’s external-sector management. Though, the underlying objective of the facility—to attract foreign currency assets and strengthen the external sector—remained unchanged.

Also read: RBI’s FCNR U-turn dents policy certainty

How will the NRI deposits appear in RBI balance sheet?

According to RBI Governor Malhotra, the foreign currency assets received through the swaps would appear as foreign currency assets, swelling the central bank’s balance sheet. Further, the outstanding forward leg would be displayed as a contingent liability and remain an off-balance-sheet item.

A report by SBI Research expects India's balance of payments (BoP) to post a surplus of around USD 50 billion in FY27, with the current account deficit (CAD) likely to remain contained at 1 per cent of GDP, as strong foreign currency inflows improve the country's external position.

RBI's FCNR(B) deposit mobilisation scheme has already attracted USD 57 billion in inflows, while another USD 25-30 billion could flow in during the remaining days of August, taking total collections to around USD 85 billion, the report edtimated.

Speaking about the rupee and the RBI’s record net short forward-dollar position, Malhotra said the position remained “very manageable”, and was was primarily the result of swaps previously undertaken to infuse liquidity and the latest facilities intended to strengthen the balance-of-payments position.

“The exchange rate continues to be market determined. Our policy on intervention remains the same, which is to curb excessive volatility and any undue speculative activity,” he said, emphasising that the RBI remained committed to ensuring orderly financial conditions and orderly movements in the exchange rate.

Add as a Reliable and Trusted News Source
Add Now!

(You can now subscribe to our WhatsApp channel)

(You can now subscribe to our WhatsApp channel)

Read More News on
RBI Governor Sanjay MalhotraFCNR(B) deposit schemeFCNR depositsNRI deposits schemeRBI FNCRfcnr deposit ratesOFCBfcnr swaprbi fcnr news

Enter search text:

Continue reading with one of these options:
Limited Access
Free
Login to get access to some exclusive stories

& personalised newsletters
Login Now

Unlimited Access
Starting @ Rs120/month
Get access to exclusive stories, expert opinions &

in-depth stock reports
Subscribe Now

Unlock Access to All Exclusives with ETPrime FREE TRIAL

15 Days Free: Unlock All ETPrime Exclusives, Market Tools & ePapers

Trial offer expiring in00 : 05 : 00

I'd rather pay ₹2599 now

Uh-oh! This is an exclusive story available for selected readers only.

Worry not. You’re just a step away.

Prime Account Detected!

It seems like you're already an ETPrime member with

Log out of your current logged-in account and log in again using your ET Prime credentials to enjoy all member benefits.

Unlock ETPrime's Exclusive Stories Today!

Subscribe to gain powerful insights on business, stock market and industry trends.

Big Price Drop! Flat 40% Off

Student Only Offer

Already a Member? Sign In now

Already a Member? Sign In now
Already a Member? Sign In now

Offer Exclusively For You

Save up to Rs. 700/-

ON ET PRIME MEMBERSHIP

Avail Offer

Offer Exclusively For You

Get 1 Year Free

With 1 and 2-Year ET prime membership

Avail Offer

Offer Exclusively For You

Get 1 Year Free

With 1 and 2-Year ET prime membership

Avail Offer

Offer Exclusively For You

Get Flat 40% Off

Then ₹ 1749 for 1 year

Avail Offer

Offer Exclusively For You

ET Prime at ₹ 49 for 1 month

Then ₹ 1749 for 1 year

Avail Offer

Special Offer

Get flat 40% off on ETPrime

Avail Offer
Avail Offer

Claim NowAlready a Member? Sign In now

Need Assistance?

Connect with an ETPrime expert for personalized support and guidance

+91 9484700004

' + h3 + '

' + h4 + '

' + listing + '

What’s Included with

ETPrime Membership

1Exclusive Insights That Matter

Uncover the truth with our investigative stories

Make strategic moves using the real-world case studies

Read industry-specific stories to identify emerging trends

Spot opportunities with in-depth insights that matter

Trump temper on H-1B visas is forcing Indians to do these things to stay put in US

What Adani’s US indictment means for India Inc’s overseas fundraising
Why veterans like Reliance, L&T are on acquisition spree? Aswath Damodaran has an answer.

Will China’s dollar bond sale in Saudi Arabia trump the US in financial world?
Huawei launches its own OS to compete with Google and Apple. But can it win beyond China?

The problem with lab grown diamonds
Why a falling rupee is a better option for the economy

A list of top 20 momentum stocks that have delivered massive returns in one year