Reserve Bank of India mobilizes $143.6 billion via forex swap schemes

The Reserve Bank of India (RBI) has mobilized a total of $143.59 billion through its special forex swap windows as of September 18. The vast majority of these inflows, approximately $132.98 billion, were generated through Foreign Currency Non-Resident (Bank) or FCNR(B) deposits. Other significant contributors include $5.32 billion from overseas foreign currency borrowings (OFCBs) and $5.30 billion from external commercial borrowings (ECBs).

The swap facility was operationalized on June 8 to strengthen the balance of payments and incentivize capital inflows amid pressure on the rupee and depleting forex reserves. While the FCNR(B) window closed on August 31, the ECB and OFCB windows are scheduled to remain open until December 31.

S&P Global Ratings described the mobilization as a “shot in the arm” for banks facing tight funding conditions. However, the massive influx of dollars has created a liquidity challenge for the central bank. As the RBI swaps dollars for rupees, it injects significant domestic currency into the financial system, resulting in a substantial liquidity surplus that the RBI must now work to absorb.