The RBI’s FCNR(B) scheme has attracted more than $52 billion, strengthening its ability to support the rupee, but global monetary conditions have limited currency appreciation.
The Reserve Bank of India’s FCNR(B) deposit mobilisation scheme has attracted more than $52 billion so far and could have crossed $80 billion, including related foreign currency borrowings, had the window remained open until the original September-end deadline. Yet, unlike the 2013 FCNR(B) programme, the rupee has failed to stage a meaningful appreciation, highlighting the influence of global monetary conditions over exchange-rate movements.
Why 2013 was different
The contrast with 2013 is striking. The earlier FCNR(B) scheme, launched between September 4 and November 30, 2013, helped restore confidence following the taper tantrum. The rupee appreciated from 65.70 per dollar at end-August 2013 to 62.45 by end-November, a gain of 4.9 per cent, and strengthened further to 59.89 by March 2014, reflecting an overall appreciation of 8.8 per cent, according to SBI Research.
This time, however, the currency has barely moved despite much larger inflows. The rupee was at 95.71 per dollar on June 8, 2026, when the latest FCNR(B) window opened, and was around 95.60 on August 17, implying a cumulative appreciation of just 0.1 per cent.
“The impact on rupee post the announcement of FCNR(B) measures has been surprisingly minimal,” said Soumya Kanti Ghosh, Group Chief Economic Adviser at State Bank of India, in its report. He noted that while the magnitude of the appreciation may differ from 2013 due to vastly different macroeconomic conditions, the direction of the impact should ideally have been supportive of the currency.
Global conditions limit rupee gains
Economists say the muted response reflects a much tougher global backdrop than in 2013. “You can’t expect the rupee to appreciate merely because of FCNR(B) inflows,” said Gaura Sengupta, Chief Economist at IDFC First Bank. “The stability in the INR is because RBI has been intervening in the market and limiting depreciation pressure. RBI’s ability to intervene has been supported by these flows.”
Sengupta said a balance-of-payments surplus does not automatically translate into currency appreciation, particularly when global interest rates remain elevated. Much of the FCNR(B) money is being absorbed through RBI swap facilities, allowing the central bank to defend the currency rather than push it higher. Without the FCNR(B) inflows and RBI intervention, the rupee would likely have weakened much more sharply.
According to her, the world is currently grappling with high inflation, elevated debt levels and tighter monetary policy, unlike the period following the taper tantrum when abundant liquidity and easing fears around US policy tightening helped emerging-market currencies recover. “The FCNR(B) has helped stabilise the currency and limit depreciation pressure, but it cannot negate it,” she adds.
Oil prices, US yields pose risks
SBI Research also pointed to global risks that could keep pressure on emerging-market currencies, including record-high long-term US Treasury yields and the possibility of Brent crude oil rising towards $100 per barrel, developments that would be negative for a large oil importer such as India.
The RBI’s decision to close the FCNR(B) window a month early suggests it may already have achieved its mobilisation target. Sengupta said keeping the facility open could have led to significantly larger inflows, creating repayment risks three to five years later when these deposits mature. The swaps used to absorb inflows also inject rupee liquidity into the banking system, adding to liquidity-management challenges.
FCNR(B) inflows may support rupee stability
Going forward, economists expect inflows to continue supporting the rupee by boosting the RBI’s intervention capacity and foreign exchange reserves. But unless global monetary conditions ease materially or crude oil prices decline sharply, a repeat of the 2013-style appreciation appears unlikely. The latest FCNR(B) scheme has strengthened the RBI’s ability to defend the currency, but it has not been enough to change its direction.
Published on August 17, 2026
