The Reserve Bank of India (RBI) announced a special FCNR(B) deposit mobilisation framework on June 5, allowing banks to raise three‑ to five‑year foreign‑currency deposits until September 2026. The move was designed to tap the Non‑Resident Indian (NRI) segment, offering concessional hedging rates to make such deposits more attractive.

Initial Surge and RBI Clarifications

Following the RBI’s June 23 clarification that banks could extend loans against FCNR(B) balances, the scheme witnessed a rapid acceleration. Banks seized the opportunity, pushing the cumulative inflow close to the $10 billion mark, a milestone that underscored strong initial demand.

Factors Dampening the Momentum

However, the enthusiasm has waned as global bond yields rose by 25‑40 basis points and the cost of raising dollar funds increased. Ongoing geopolitical tension in West Asia and higher yields in US‑European bond markets have made further mobilisation less appealing. A banking source warned, “The projected $50‑70 billion flow may not materialise under tight conditions, but it will pick up when funding costs and yields ease.”

Impact on the Rupee and Market Sentiment

After the RBI introduced the new FCNR scheme, the rupee briefly recovered to the 94 level against the dollar, only to slip to 96.20 as oil prices surged and global yields rose. Dilip Parmar, Senior Research Analyst at HDFC Securities, noted, “The rupee underperformed its Asian peers, reaching a one‑month low, while rising global bond yields could further dampen expected FCNR(B) inflows.”

Policy Response and Outlook

Finance Minister Nirmala Sitharaman met with bank MDs and CEOs, urging enhanced NRI outreach to sustain mobilisation momentum. By absorbing the hedging burden and offering concessional rates, the RBI has tried to keep FCNR(B) deposits competitive. Experts suggest that if global bond yields and dollar‑funding costs recede, an additional $50‑70 billion of foreign capital could flow into Indian markets.