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RBI to end FCNR(B) swap window early, keeping USD/INR range-bound
RBI shut the concessional swap facility on 31 August, one month ahead of the 30 September deadline, after it drew USD 52.3 billion in inflows as of 13 August.
Commerzbank analysts told FXStreet that India’s Reserve Bank recalibrated its concessional FCNR(B) swap facility, closing it early on 31 August instead of 30 September after encouraging FX inflows.
The early termination removes a source of rupee liquidity and bond demand that had helped support the government bond complex, particularly compressing yields at the shorter end and the belly of the curve, while the central bank’s larger reserves and forward book were said to reduce the need for additional liabilities.
FXStreet also cited that USD/INR rose 0.2% to 95.61 following the decision and has stayed broadly range-bound between 94.70 and 96.70 since early July, with RBI intervention containing volatility and limiting depreciation risk.
Commerzbank noted the decision likely reflects diminishing benefits alongside rising liquidity and balance-sheet costs, while support measures for inflows via overseas foreign currency borrowing and external commercial borrowing remain in place until 31 December.