India’s foreign exchange reserves soared to an all-time high of $729.328 billion in the week ended August 21, 2026, with the reserves being boosted by robust inflows into foreign currency non-resident (Bank) deposits mobilised by banks under the RBI’s limited period concessional sway facility.
In the reporting week, the reserves jumped by $12.422 billion. Since March-end 2026, India’s reserves perked up by $38.221 billion.
The previous record high for India’s forex reserves was $728.494 billion in the week ended February 27, 2026.
With the RBI announcing an early end (August 31 against the original announcement of September 30, 2026) to the concessional swap facility, there has been a step up in inflows into the FCNR (B) deposits.
Between June 8, 2026 (when banks started mopping up resources under the RBI’s concessional swap facility) till August 21, 2026, FCNR (B) deposits saw an accretion of a whopping $65.397 billion, per latest RBI data. ‘
Under the RBI’s concessional swap facility, banks and public sector undertakings raised $4.860 billion (via overseas foreign currency borrowings) and $2.591 billion (via external commercial borrowings), respectively.
Manoranjan Sharma, Chief Economist, Infomerics Ratings, observed that the sharp increase in forex reserves chiefly reflects an exceptional inflow episode, not merely an underlying trade-surplus improvement.
“The RBI’s June measures to strengthen the balance of payments, especially incentives and facilities that attracted overseas foreign-currency inflows, including NRI/FCNR(B)-related deposits, brought substantial dollars into the banking system. The RBI absorbed part of these flows, including through discounted FX swaps, rather than allowing an abrupt rupee appreciation,” he said.
Sharma emphasised that the reserve accumulation materially strengthens India’s external shock absorber, giving the RBI capacity to smooth disorderly rupee depreciation, finance essential imports during oil-price or geopolitical shocks, and reassure foreign investors about external-payment resilience.
“However, the quality and durability of the increase (in forex reserves) matter. Deposit-led inflows raise external liabilities and may reverse when incentives expire or global yields change. RBI dollar absorption also creates domestic liquidity-management costs.
“Thus, the record stock improves near-term stability, but should not mean that structural current-account vulnerabilities, especially oil dependence, have disappeared- no way!” he said.
Amit Pabari, MD, CR Forex Advisors, underscored that the build up in forex reserves isn’t accidental. RBI’s measures (introduction of a special USD-INR Forex Swap facility covering FCNR(B) deposits, ECB and OFCB inflows on June 08, 2026) have pulled in $72.848 billion till August 21 alone.
“But instead of flowing into the open market to lift the rupee, most of it (dollars) is landing straight into RBI’s own reserves, with the central bank using this window to rebuild its war chest rather than let the dollars do the rupee’s job.
“And that cushion may be running out faster than expected. RBI has already preponed the deadline for its FCNR deposit scheme by a month. Once that window shuts, this steady stream of inflows dries up too…,” Pabari said.