SBI Research Sees Massive Foreign Currency Inflows Through FCNR Deposits, ECBs and Overseas Borrowings as RBI's Special Window Gains Momentum

India's external sector could witness a significant transformation during FY2026-27 as the Reserve Bank of India's (RBI) concessional swap facility is expected to attract between $80 billion and $85 billion in foreign currency inflows, according to an SBI Research report. The special facility, introduced in June 2026, has already mobilised nearly $21 billion in overseas funds and is expected to play a crucial role in strengthening India's balance of payments, supporting the rupee and enhancing foreign exchange reserves.

The initiative comes at a time when global financial markets remain volatile due to geopolitical tensions, elevated crude oil prices and uncertainty surrounding global interest rates. By encouraging non-resident deposits and overseas borrowings, the RBI aims to improve foreign currency liquidity and reduce India's vulnerability to external shocks.

Economists believe that if the projected inflows materialise, India could enter FY27 with one of its strongest external sector positions in recent years, providing policymakers with greater flexibility to manage currency volatility and support economic growth.

What Is RBI's Concessional Swap Facility?

The Reserve Bank of India introduced the concessional swap facility on June 5, 2026, and operationalised it on June 8, 2026, as part of a broader package of measures to strengthen the country's external finances.

The facility enables banks to mobilise foreign currency through various instruments while allowing them to swap these funds with the RBI at concessional rates.

The objective is to:

• Boost foreign exchange reserves.

• Encourage overseas deposits.

• Improve foreign currency liquidity.

• Strengthen the balance of payments.

• Stabilise the Indian rupee.

• Attract long-term capital inflows.

The scheme remains open until:

• September 30, 2026 for FCNR(B) deposits.

• December 31, 2026 for ECBs and Overseas Foreign Currency Borrowings.

Nearly $21 Billion Raised Within Weeks

The response to the RBI's initiative has been encouraging.

Foreign Currency Mobilisation (Till July 17, 2026)

The majority of inflows have come through Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, reflecting strong confidence among Non-Resident Indians (NRIs).

FCNR Deposits Expected to Cross $70 Billion

SBI Research expects FCNR(B) deposits to remain the largest contributor under the scheme.

Expected Total Inflows

If these projections are achieved, the scheme would become one of the largest foreign currency mobilisation programmes undertaken by the RBI in recent years.

Public Sector Banks Lead the Mobilisation Drive

According to the report, public sector banks have played the leading role in attracting FCNR(B) deposits.

Several factors have supported their performance:

• Extensive overseas branch network.

• Strong relationships with NRI customers.

• Attractive deposit offerings.

• Greater customer confidence.

Private sector banks have also participated, but public sector lenders currently account for the majority of mobilised deposits.

Why the RBI Introduced the Facility

The RBI launched the facility against the backdrop of increasing global uncertainty.

Major concerns included:

• Rising geopolitical tensions.

• Volatile crude oil prices.

• Currency fluctuations.

• Uncertain global capital flows.

• Higher global interest rates.

These developments increased the importance of strengthening India's external financing position.

Strengthening India's Balance of Payments

The RBI's measures are expected to significantly improve India's Balance of Payments (BoP).

SBI Research now projects:

FY27 Balance of Payments

• Surplus exceeding $50 Billion

Earlier estimates had suggested a much weaker external position, but stronger-than-expected foreign currency mobilisation has substantially improved the outlook.

A healthy BoP surplus supports currency stability and enhances investor confidence.

Capital Account Set for Significant Improvement

Apart from deposits, the report expects India's capital account to receive a major boost.

Additional Capital Inflows Expected

• $75–85 Billion during FY27

This includes:

• FCNR deposits.

• Overseas borrowings.

• External commercial borrowings.

• Other capital inflows.

Such inflows would strengthen India's ability to finance imports and external obligations.

Remittances Likely to Reach New Record

India is also expected to continue benefiting from robust inward remittances.

According to SBI Research:

Projected Remittances

• More than $150 Billion during FY27

India has remained the world's largest recipient of remittances for several years, supported by millions of Indians working overseas.

Higher remittances strengthen household incomes, consumption and foreign exchange reserves.

FDI Outlook Remains Positive

The report also expects healthy Foreign Direct Investment (FDI) inflows.

FY27 FDI Projection

• $15–18 Billion

Continued investments in:

• Manufacturing.

• Infrastructure.

• Renewable energy.

• Technology.

• Financial services.

are expected to support India's long-term economic growth.

Foreign Portfolio Investors Could Return

Although Foreign Portfolio Investors (FPIs) remained cautious during the first half of FY27 due to geopolitical tensions and volatile energy prices, the report expects stronger participation in the second half of the financial year.

Improving domestic fundamentals and easing global uncertainties could encourage renewed investment in Indian equity markets.

Debt markets have already witnessed relatively stable foreign participation.

Impact on the Indian Rupee

The RBI's initiative is expected to provide meaningful support to the rupee.

Higher foreign currency inflows generally:

• Increase forex reserves.

• Improve liquidity.

• Reduce external vulnerabilities.

• Stabilise exchange rates.

• Strengthen investor confidence.

However, global crude oil prices and US monetary policy will continue influencing the rupee's movement.

Current Account Deficit Expected to Stay Comfortable

Despite elevated crude oil prices earlier this year, India's Current Account Deficit (CAD) is expected to remain manageable.

FY27 CAD Projection

• 1.0–1.2% of GDP

A moderate current account deficit indicates that India's external finances remain sustainable despite ongoing global challenges.

Why FCNR Deposits Are Important

FCNR(B) deposits enable NRIs to maintain fixed deposits in foreign currencies with Indian banks.

Key benefits include:

• Protection against currency fluctuations.

• Attractive interest rates.

• Stable foreign currency funding.

• Strengthening India's forex reserves.

• Supporting banking system liquidity.

For policymakers, these deposits provide relatively stable and predictable foreign currency resources.

Challenges That Remain

While the outlook is encouraging, several global risks continue to warrant attention.

Potential Risks

• Escalation in geopolitical conflicts.

• Sustained rise in crude oil prices.

• Higher US interest rates.

• Stronger US dollar.

• Slower global economic growth.

• Volatile capital flows.

Any of these factors could influence the pace of future foreign currency mobilisation.

Outlook for India's External Sector

India's external sector appears significantly stronger than earlier projections.

Supportive factors include:

• RBI's proactive policy measures.

• Strong NRI confidence.

• Healthy remittance flows.

• Stable FDI.

• Improving capital inflows.

• Robust banking participation.

Together, these factors are expected to strengthen India's macroeconomic stability throughout FY27.