The policy support has helped to improve external financing conditions at a time when market concerns over oil prices, capital outflows and reserve adequacy had intensified.
Tanvee Gupta Jain,
Chief India Economist,
UBS
Mumbai, July 30, 2026: The RBI announced measures in June to incentivise foreign currency inflows—including relaxed norms for FCNR(B) deposits and overseas borrowings under the RBI-subsidised swap window—
India has already mobilised over US$32bn of dollar inflows
The RBI's measures have already attracted approximately US$32bn in inflows in around 45 days, with FCNR(B) deposits accounting for the bulk of these flows. The FCNR (B) window will remain open until 30 September, leaving room for more inflows. We believe use of the leveraged borrowing facility by the banks is driving the bulk of the deposit accretion. As per our UBS India banking team, most banks are sounding positive on the prospects of raising deposits through FCNR (B), although the numbers reported by Indian banks so far—excluding foreign banks and SBI (which has yet to report)—do not appear sufficient to explain the US$32bn mobilisation. Media reports suggest that MNC banks, such as HSBC and Standard Chartered Bank, have raised US$5.5bn and US$1bn, respectively. If we extrapolate the total mobilisation under the 2013 scheme, banks could potentially raise US$66bn or 2.4% of system deposits. This could lead to deposit growth acceleration towards the mid-teens and sustain credit growth momentum in the high teens. We expect large private banks to benefit more. We also expect some softening in domestic rates, which could be beneficial for NBFCs.
What explains the gap?
Over the past week, some investors have questioned the validity of these inflow estimates, given that they are not yet fully reflected in the RBI's reported foreign currency assets (FCA), banking system liquidity conditions, or bank deposit growth data. The RBI has explicitly stated that the scheme applies to fresh FCNR(B) deposits, including deposits renewed upon maturity, implying that a part of the reported mobilisation may reflect the rollover of existing FCNR(B) deposits under more attractive terms. We believe the RBI also likely absorbed part of these inflows to unwind portions of its sizeable forward FX book (which stood at US$106.7bn as of end May), particularly at shorter maturities. Since 5 June, foreign currency assets (FCA) have increased by US$7.6bn through 17 July, while bank deposit growth has remained relatively modest at 12.7%YoY in the fortnight ending 15 July 2026. Drawing a parallel with the 2013 FCNR
(B) deposit mobilisation scheme, there is typically a lead-lag between deposit mobilisation, bank reporting, swap execution with the RBI, inclusion in FCA and eventual reflection in domestic liquidity conditions. Consequently, until these inflows are fully incorporated into FCA, they will not translate into a corresponding increase in reported rupee liquidity. Moreover, part of the inflows may be offset by deposit rollovers, hedging activity, valuation effects, balance-of-payments outflows, and the RBI's management of its sizeable short-dollar forward position.
India's BoP outlook has improved in the near term
While the recent energy shock has highlighted India's macroeconomic vulnerabilities—particularly around the balance of payments (BoP) and INR stability—these risks have eased in recent weeks, supported by RBI measures to attract foreign currency inflows. We believe these measures could potentially attract cUS$60 billion of inflows, helping to strengthen India's external financing position. However, tighter global monetary policy remains a key risk, as it could tighten global financial conditions and weigh on capital flows. From an estimated deficit of cUS$50bn or more than 1% of GDP at the peak of external stress, we now expect India's BoP to return to a surplus of 0.5% of GDP in FY27, driven largely by the RBI's aggressive measures to mobilise foreign-currency funding. The policy support has helped to improve external financing conditions at a time when market concerns over oil prices, capital outflows and reserve adequacy had intensified.
INR to remain stable amid a stronger USD and renewed geopolitical tensions
Many investors have questioned the efficacy of the RBI's dollar mobilisation measures, given that the INR has remained broadly range-bound. External conditions have also shifted: the USD has strengthened amid expectations of potential Fed tightening, while oil prices remain volatile due to renewed ongoing geopolitical tensions. Nevertheless, INR has remained largely range-bound since the RBI announced these measures. We retain our FY27 year-end USD/INR forecast of 96, reflecting the balance between a modestly improved near-term external outlook and persistent medium-term structural headwinds (including the need to attract higher net FDI inflows, risks to IT services exports from AI-driven disruption, and possible USD strength should the Fed hike rates).
Over the past week, some investors have questioned the validity of these inflow estimates, given that they are not yet fully reflected in the RBI's reported foreign currency assets (FCA), banking system liquidity conditions, or bank deposit growth data. The RBI has explicitly stated that the scheme applies to fresh FCNR(B) deposits, including deposits renewed upon maturity, implying that a part of the reported mobilisation may reflect the rollover of existing FCNR(B) deposits under more attractive terms.
