Full Flow: FCNR Deposits Could Hit $100 Billion, Beat Estimates

India's FCNR-B (Foreign Currency Non-Resident Bank) deposit scheme is on track to draw as much as $100 billion in inflows, according to multiple analyst estimates, dramatically outperforming initial projections and marking one of the fastest foreign currency mobilization drives in the country's history.

How Fast the Numbers Have Grown

The trajectory of upgraded estimates tells the story of how quickly this scheme has outperformed expectations. SBI Research initially projected total mobilization of $40-45 billion, then raised that estimate to $65-70 billion after finding deposits had crossed the 2013 mobilization benchmark of $26 billion in just around 45 days — one of the fastest foreign currency deposit drives in Indian history. By mid-August, Jefferies reported that $41 billion had already been mobilized, projecting the total would reach $80-100 billion by the scheme's close. Days later, inflows had crossed $52 billion as of August 14, with market participants now expecting the total to reach $75 billion by the end of August — and some estimates from Axis Bank Research putting the ceiling as high as $100-190 billion, depending on how much leverage banks and depositors ultimately use.

How the Scheme Works

The RBI launched the concessional swap facility on June 5, agreeing to bear the full hedging cost — effectively a subsidy of roughly 3% per annum — on eligible fresh FCNR-B deposits mobilized by banks from non-resident Indians (NRIs). The move was designed to encourage banks to bring in foreign currency deposits with maturities of three to five years, providing India's forex reserves and the rupee with a durable, longer-term source of dollar inflows rather than relying solely on more volatile portfolio flows.

A Race Against an Advanced Deadline

Adding urgency to the current scramble, the RBI advanced the scheme's closure date from its original September deadline to August 31, 2026 — leaving banks with just a handful of working days to secure as much foreign currency as possible before the concessional window shuts. The accelerated deadline triggered a rush among depositors, including those not specifically chasing leveraged returns, simply hoping to lock in favorable rates before the facility closes. Axis Bank, for instance, raised interest rates on FCNR-B deposits above $1 million to 6.40% from 6.25%, giving it the highest rate among private banks for these deposits.

The Leverage Factor Driving Extraordinary Returns

A significant share of the recent inflows has come through leveraged deposit structures, with some banks offering leverage as high as 19X. These leveraged arrangements are yielding depositors effective returns of around 14-15% — an extraordinarily high figure that has made the scheme attractive well beyond its base interest rate alone, and helps explain why demand has so dramatically outpaced original forecasts.

Why This Matters for India's Economy

The scheme forms part of a broader RBI and government strategy to strengthen India's external account amid rising global uncertainty, particularly tied to elevated crude oil prices linked to the ongoing US-Iran war. According to Axis Mutual Fund, policymakers are targeting $80-100 billion in total foreign currency inflows over a 12-month period through three main channels: FCNR-B deposits (the largest component, expected to contribute around $60 billion in that framework), External Commercial Borrowings (roughly $10 billion), and passive inflows tied to India's anticipated inclusion in the Bloomberg Global Aggregate Bond Index (around $20 billion). Analysts note that every $10-per-barrel increase in crude oil prices can add roughly 50 basis points to India's CPI inflation and widen the fiscal deficit by about 27 basis points — underscoring why building a durable dollar buffer has become a policy priority as the Iran conflict keeps oil prices elevated and volatile.

The Historical Precedent — and Its Warning

The current mobilization drive draws direct comparison to a similar 2013 FCNR-B scheme, which brought in roughly $26 billion at the time — a figure this year's drive has already surpassed several times over. However, that historical episode carries a cautionary note: axis Bank Research's analysis suggests most of the 2013 inflows reversed within three to five years as deposits matured and were repatriated. Analysts describe this pattern as "a feature, not a bug" of the scheme's design — since India's relatively low external debt liabilities meant that earlier stress in FX markets stemmed from short-term dollar liquidity concerns rather than deeper solvency issues, making a temporary liquidity boost an appropriate and effective policy tool even if the underlying deposits eventually flow back out.

The Risk of the Current Leveraged Structures

Bankers have flagged a similar risk this time around, specifically tied to the scheme's heavy use of leverage. "Such deposits may not remain in India once the effective returns normalise," one banker noted, pointing out that the current extraordinarily high effective yields — driven by leverage rather than by the underlying deposit rate alone — are unlikely to persist once the concessional swap window closes and market conditions normalize.

The Disconnect With the Rupee

Notably, despite the surge in FCNR-B inflows, the rupee has continued to weaken, having depreciated roughly 12.5% since April 2025 despite what SBI Research describes as healthy capital inflows. Part of the disconnect stems from an accounting lag: banks first mobilize the FCNR-B deposits and then swap them with the RBI for rupee liquidity, meaning the resulting increase in India's Foreign Currency Assets shows up gradually in official reserve figures rather than immediately. SBI Research has also argued that the RBI's own foreign exchange market intervention has been comparatively limited — estimating the central bank has intervened by an average of just $14 million a day, a level the research house believes is insufficient to meaningfully curb rupee volatility or arrest its depreciation.

What's Next

With the scheme's window now closing August 31, the coming days will determine just how close total inflows come to the upper end of analyst projections — and how much of that capital ultimately proves durable versus how much represents short-term, leverage-driven positioning likely to reverse once the concessional swap subsidy expires. For continuing coverage, see Outlook Business's report.

Whatever the final tally, the scheme has already succeeded in one important respect: giving India a substantial, if partly temporary, buffer of foreign currency reserves at a moment when global oil price volatility and geopolitical uncertainty have made external account stability more valuable than usual.