- Why in news
- On 2 September 2026, IFSCA said 20 IFSC Banking Units at GIFT City had sanctioned USD 54.02 billion under RBI's FCNR(B) swap facility as on 31 August 2026.
- What it is
- GIFT City IFSC is India's first International Financial Services Centre, in Gujarat. It is regulated by IFSCA, a unified authority set up under the IFSCA Act, 2019. IFSC Banking Units there deal in foreign currency with global sources of liquidity.
- Swap sanctions
- 20 IBUs sanctioned USD 54.02 billion under the RBI swap facility for FCNR(B) deposits by 31 August 2026; about USD 52.82 billion was disbursed.
- ECB disbursement
- IBUs disbursed USD 11.62 billion of External Commercial Borrowings from April to August 2026.
- Bond listings
- Indian banks raised USD 11.12 billion via bond listings on IFSC exchanges in April-August 2026.
- Regulator and legal basis
- IFSCA is the unified regulator for IFSCs, set up under the IFSCA Act, 2019.
- FCNR(B)
- FCNR(B) is a foreign currency deposit account that NRIs can hold in India, with the deposit and its repayment in foreign currency, so the depositor bears no exchange risk.
- Launch date
- The special USD-INR swap facility began on 8 June 2026.
- Early closure
- RBI advanced the closure of the FCNR(B) window from 30 September to 31 August 2026.
- FCNR(B) basics
- FCNR(B) deposits are held in foreign currency, so the depositor bears no exchange risk. They are open to NRIs and OCIs, and the principal and interest are fully repatriable.
Don’t confuse with FCNR(B) vs NRE deposit: FCNR(B) is held in foreign currency; an NRE account is held in rupees.
Don’t confuse with ECB vs FDI: ECBs are commercial loans from non-resident lenders (debt); FDI is equity investment.
Don’t confuse with ECB vs FCNR(B): An ECB is a commercial loan raised abroad by an Indian borrower. An FCNR(B) deposit is money placed by a non-resident with an Indian bank.
Economy terms and data: 42 Prelims questions since 2013, rising in recent years; they test what a term or instrument means. In Mains, 12 news-triggered questions.
Why it matters
- Channels foreign currency liquidity to India and supports forex inflows.
- Builds GIFT City as a hub that keeps offshore financing activity within India.
- Large inflows raise forex reserves and strengthen external buffers against rupee volatility.
- Long-term deposits and borrowings help finance the current account deficit without sudden outflow risk.
Problems
- Swap-linked inflows are tied to a special RBI window and may not be lasting.
- Higher external borrowing raises exchange-rate and debt-servicing risks.
- Inflows are tied to a swap window and the deposits are short to medium term, so a rollover or repayment bulge arises on maturity.
- RBI takes on the forward-rate exposure, which can create a cost if the rupee weakens or the swap has to be unwound.
Way forward
- Deepen IFSC's own markets so activity does not depend on special windows.
- Monitor external debt and hedging by borrowers.
- Move to stable inflows through reforms such as deeper capital markets, rather than depend on one-off windows.
- Manage the maturity profile of deposits and keep adequate reserves to handle the repayment of swapped funds.
Put in your answer
GIFT IFSC example: USD 54.02 billion sanctioned under the FCNR(B) swap by 31 August 2026 shows IFSC's role in channelling foreign capital.
2013 precedent: The RBI's 2013 FCNR(B) swap scheme raised about US $26 billion, offering a precedent for crisis-time forex mobilisation.
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- 2013Prelims Q83Which items form part of India's foreign-exchange reserves?
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UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
Prelims practice · Statement I and II
Ours, not from a UPSC paper
Consider the following statements about the RBI's special USD-INR swap facility of 2026 and FCNR(B) deposits:
- Statement-I: FCNR(B) deposits made up most of the foreign exchange inflows mobilised under the RBI's 2026 USD-INR swap facility.
- Statement-II: In an FCNR(B) deposit, the depositor bears the exchange-rate risk because the deposit is held in foreign currency.
Which one of the following is correct in respect of the above statements?
True or false?
1 of 5
Statements the way Prelims prints them. Say first, then see the fact.
1.The RBI's special USD-INR swap facility covered FCNR(B) deposits, Overseas Foreign Currency Borrowings and External Commercial Borrowings.
True. The facility covered FCNR(B), OFCB and ECB.
2.RBI extended the FCNR(B) window beyond 30 September 2026 because of the strong response.
False. RBI advanced the closure from 30 September to 31 August 2026.
3.In an FCNR(B) deposit, the exchange-rate risk is borne by the depositor.
False. The deposit is in foreign currency, so the depositor bears no exchange risk; the bank bears it, or shifts it through a swap.
4.FCNR(B) deposits can be held by Non-Resident Indians and their principal and interest are repatriable.
True. FCNR(B) is for NRIs and OCIs, with full repatriation.
5.GIFT City IFSC is regulated by the Reserve Bank of India alone.
False. IFSCA, a unified authority set up under the IFSCA Act, 2019, regulates it.
Written by us from the release, not by UPSC; checked by a second model.
Mains practice
15 marks · 250 words
RBI's special USD-INR swap facility launched in June 2026 mobilised US $73 billion in under eleven weeks, with FCNR(B) deposits contributing the bulk of it, and surpassed the 2013 FCNR(B) swap scheme. Examine how such swap windows help India manage pressure on the rupee and external buffers, and discuss the costs and risks they carry.
Worth revising until Prelims 2028: most news questions come within two years of the event.