In June this year, the Reserve Bank of India (RBI) introduced special measures for foreign-currency non-resident – FCNR(B) – deposits to encourage foreign-currency inflows into India. Under the framework, the RBI provided lenders with a special forex-swap facility for eligible fresh FCNR(B) deposits, which offered competitive deposit rates.

The initiative resulted in NRIs opting for FCNR-(B) in the first quarter ending June. However, a decline in rupee-denominated NRE (non-resident external) balances pulled down overall NRI-deposits inflow during the period. NRE deposits are bank accounts held in India by NRIs to deposit and manage money earned in foreign countries.

The total NRI-deposit inflow in Q1 FY27 was 22% at $2.8 billion lower y-o-y, but FCNR(B) deposit inflows surged 123% y-o-y to $1.7 billion. Rupee-denominated NRE account balances plunged 93% during the period to $0.14 billion. The inflows into NRO accounts were at $0.9 billion.

As on August 21, a total of $72.85 billion of foreign exchange had been generated via FCNR(B) deposits, External Commercial Borrowings (ECBs), and Overseas Foreign Currency Borrowings (OFCBs).

FCNR deposits, which are foreign-currency denominated, do not carry currency risk. This is one of the main reasons for NRIs to increasingly choose depositing their savings in this system. – editor@nrifocus.com