NRIs put $100 billion in RBI scheme to take India's forex reserves to record high

Collections from a scheme launched by the Reserve Bank of India (RBI) to attract foreign currency investment by non-resident Indians (NRIs) has touched $100 billion, and such has been its success that the government has decided to wrap it up a month earlier than planned. The massive dollar inflow from NRIs has pushed India's forex reserves to a record high of $729.3 billion, at a time when the war in the Middle East, volatility in crude prices and supporting a falling Indian rupee was draining the country's foreign exchange reserves.The RBI launched the Foreign Currency Non-Resident (Bank) or FCNR(B) in June and by August 31 it had topped the $100-billion mark, reported Bloomberg, citing a report by The Financial Express. RBI Governor Sanjay Malhotra had expected the scheme to attract about $80 billion.The RBI shut the FCNR(B) window a month ahead of its original September 30 deadline, amid concerns over the reversal risks that could arise from excessive inflows. "While the FCNR(B) window closed on Monday, banks will be allowed to avail of the swap facility for deposits already contracted until September 11," reported The Financial Express.A shored-up forex reserves also gives the RBI ammunition to intervene in the currency market and support the Indian Rupee (INR), which continues to face pressure from elevated oil prices. This comes as India's forex reserves and its currency have been facing major headwinds due to the ongoing US-Iran war and the resulting rise in global energy prices.The UK-based Financial Times, had reported in early August that the country had shed $46 billion in reserves since the outbreak of the war in February, with total forex reserves standing at $682 billion as of July 24. The outlet had also reported then that the INR was one of Asia's poorest performing currencies, having weakened 6% vis a vis the US Dollar. Cut to September, things have changed. Thanks to the RBI's programmes like the FCNR(B), India's forex reserves now stand at $729.3 billion.The replenished reserves have also allowed the RBI to strengthen the rupee. The currency gained as much as 0.4% on Tuesday to 94.7988 per dollar, set for the strongest level since July 1, reported Bloomberg.WHAT IS THE RBI'S FCNR(B) SCHEME?The Foreign Currency Non-Resident (Bank) or FCNR(B) is a scheme that allows NRIs to deposit their overseas earnings in India in foreign currencies like US dollars, rather than converting them into INR.Deposits under the FNCR(B) scheme are fixed-term accounts, and both the principal and interest are paid in foreign currency, protecting depositors from losses caused by fluctuations in the INR.The RBI had intervened to make these deposits more attractive after FCNR(B) inflows plunged sharply from more than $7 billion in FY25 to just $946 million in FY26.To reverse the trend, the central bank had in June announced a concessional swap facility until September 30, 2026, which saw the RBI absorb forex hedging costs for fresh FCNR(B) deposits, that are normally borne by banks, with tenures of three to five years.The scheme generated a much stronger response than anticipated. In early August, the RBI had reported that $40.8 billion had come into the country since June. Capital inflows via the FNCR(B) crossed the $100 billion mark by August 31, The Financial Express reported, citing official sources.This is not the first time the RBI has turned to India’s diaspora flows at a vulnerable moment for the economy. The first instance came in 1991, when India faced a severe balance-of-payments crisis.The measure was revived in 2013, when India raised around $34 billion from its diaspora to stem capital outflows triggered by the US Federal Reserve's "taper tantrum".DOLLAR INFLOWS VIA FCNR(B) BOOST FOREX RESERVES, GIVE RBI MORE ROOM TO SUPPORT INRThe surge in FCNR(B) inflows has significantly strengthened India's forex reserves, which reached a record $729.3 billion as of August 21, reported news agency Reuters. For context, the Financial Times had reported back in August that the same reserves had stood at $682 billion as of July 24.The inflows have therefore rebuilt the country's external buffer at a time when higher oil prices and geopolitical tensions are putting pressure on its balance of payments. Reuters said the inflows are expected to comfortably finance India’s current-account deficit this financial year.Additionally, this forex inflow also gives the RBI greater firepower to support the rupee.Bloomberg reported on Tuesday that the rupee gained 0.4% on Tuesday to 94.7988 against the American dollar, its strongest level since July 1. This was made possible due to the RBI intervening in offshore and onshore markets with dollar sales, backed by the record forex reserves, reported the outlet.- EndsPublished By: Shounak SanyalPublished On: Sep 2, 2026 15:52 IST