RBI Governor: Robust Foreign Currency Inflows Under FCNR(B) Scheme, Rupee May Appreciate Further

RBI Governor Sanjay Malhotra has said that banks are receiving robust inflows under the Foreign Currency Non-Resident (Bank), or FCNR(B) deposit scheme, and that there is no proposal to discontinue the scheme prematurely. “We have got robust flows. We don’t have a target in mind, but expect healthy flows going forward,” Malhotra said. “There is no proposal under consideration to close the scheme prematurely. As now, the deposits have ticked all boxes. We don’t have the geographical split. We had mentioned that we had a very strong external position even before these measures. This further fortifies our external position,” he said. As on July 31, 2026, total inflows mobilised under the special facility stood at $40.816 billion as on July 31, 2026. Of this, FCNR(B) deposits accounted for the largest share at $36.725 billion, exceeding the $26 billion mobilised under a similar scheme in 2013, in less than two months after the latest window opened. This is followed by Overseas Foreign Currency Borrowings (OFCBs) at $2.575 billion and External Commercial Borrowings (ECBs) at $1.516 billion. Foreign inflows, ‘rupee may appreciate further’ The central bank had announced the concessional swap facility on June 5, 2026, to encourage fresh foreign currency inflows and support domestic liquidity. The scheme became operational on June 8, 2026. Since then, banks have increased their interest rates across FCNR(B) schemes as a means to attract foreign deposits. Many banks also reported robust flows through such schemes during the April-June quarter. On being asked if the rupee has seen enough uptick to reflect these flows, Malhotra said that the currency has already appreciated over the last month, and may appreciate further in the coming time if geopolitical uncertainties continue to de-escalate. “There can be an argument as some people have made that it (rupee) may perhaps be undervalued in nominal or real-effective-exchange rate terms. There is a lot of uncertainty. It is quite possible that the rupee may strengthen further going forward as tensions de-escalate,” he said. On Wednesday, the Indian currency ended at 95.11 against the greenback, having hit a one-month high of 94.92 earlier in the session. However, the latest closing price is just 0.7% higher than the currency’s close on June 4, a day before the central bank had announced the measures. Malhotra also reiterated that the central bank does not target a specific exchange rate for the rupee, maintaining that the currency’s value should be determined by market forces.