RBI Assures on FCNR(B) Repayments, Cites Strong Forex Reserves and Remittances

Reserve Bank of India (RBI) Governor Sanjay Malhotra has expressed confidence in India’s external sector, saying the country has adequate foreign exchange reserves and sufficient time to meet obligations linked to the Foreign Currency Non-Resident (Bank), or FCNR(B), deposits.

Speaking at the NDTV World Summit, Malhotra said India’s external position remained strong over the medium term, supported by foreign exchange reserves, services exports and remittances. He also expressed confidence in the country’s balance-of-payments outlook.

Banks mobilised USD 132.98 billion through FCNR(B) deposits under a special foreign exchange swap facility introduced by the central bank on June 8. The window for fresh deposits closed on August 31, a month before its original deadline, following a strong response.

Under the facility, the RBI agreed to bear the full hedging costs for banks raising fresh FCNR(B) deposits with maturities of three to five years. The arrangement was designed to encourage foreign currency inflows and strengthen India’s external buffers by reducing the cost of managing exchange-rate risks for participating banks.

The deposits are accepted by banks from eligible non-resident customers in permitted foreign currencies and carry contractual repayment obligations. The special facility enabled banks to mobilise these funds while allowing the central bank to manage the associated foreign exchange through swap transactions.

Malhotra said India had adequate reserves to meet its external obligations. Services exports and remittances also support the country’s foreign exchange receipts, helping finance overseas payments.

The FCNR(B) deposit window has closed, although the funds mobilised under it remain subject to their contractual maturities. The RBI Governor’s remarks come as the central bank assesses the country’s medium-term external position and its capacity to manage future foreign currency obligations.