Reserve Bank of India closes foreign currency swap facility ahead of schedule due to strong inflows and rising liquidity costs.
The Reserve Bank of India will close its concessional FX swap window for FCNR(B) deposits on 31 August, a month earlier than planned. The move follows USD52.3bn in inflows attracted by the facility as of 13 August, driven by an encouraging market response.
The decision surprised markets, as RBI Governor Sanjay Malhotra had indicated no premature closure just days earlier. The early termination reflects rising liquidity and balance-sheet costs, as inflows generated rupee liquidity that supported government bond demand and compressed yields.
USD/INR remains range-bound, with RBI intervention containing volatility. Other measures to support inflows, such as overseas foreign currency borrowing, remain in place until 31 December.