RBI to Cover Full Hedging Costs for FCNR(B) Deposits Until September 30
RBI to bear full hedging cost on FCNR(B) deposits
Image: The Economic Times
The Reserve Bank of India will cover the hedging costs for foreign currency non-resident (FCNR(B)) deposits until September 30. This move aims to encourage banks to attract dollar inflows, which have significantly decreased, dropping 87% to $946 million in FY26.
- 01The RBI's decision is intended to incentivize banks to attract foreign currency deposits.
- 02FCNR(B) deposits fell sharply from $7.076 billion to $946 million in FY26.
- 03The RBI will offer a concessional swap facility to cover the full hedging cost.
- 04The hedging cost support applies to deposits with a tenure of three to five years.
- 05This initiative is part of efforts to improve dollar inflows into the Indian banking system.
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The Reserve Bank of India (RBI) has announced that it will fully cover the hedging costs associated with the mobilization of foreign currency non-resident (FCNR(B)) deposits until September 30. This initiative is aimed at encouraging banks to attract more dollar inflows, which have seen a dramatic decline, plummeting by 87% to $946 million in FY26 from $7.076 billion in the previous fiscal year. To facilitate this, the RBI will provide a concessional swap facility that covers the entire hedging cost for fresh FCNR(B) deposits with a tenure of three to five years, thereby supporting banks in converting these deposits into local currency for domestic lending.
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This RBI initiative is expected to enhance the inflow of foreign currency into Indian banks, potentially stabilizing the local currency and improving lending capacity.
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