FCNR(B) deposits: Who bears the currency risk? | Explained

The story so far: The Reserve Bank of India (RBI) introduced a special swap facility in June to encourage non-resident Indians to put money into FCNR(B) deposits, as the rupee faced pressure from high oil prices and India sought to strengthen its foreign-exchange reserves.

The response was much stronger than the RBI’s initial target, as Indian banks mobilised more than $127 billion through these deposits, against an initial target of about $50 billion. The RBI subsequently closed the window for fresh FCNR(B) deposits on August 31, 2026.

The scheme has given banks a relatively cheap source of foreign-currency funding and added substantially to India’s foreign-exchange reserves. The deposits typically have three-to-five-year maturities, raising the question of who bears the currency risk when the principal and interest have to be paid.