The rupee on Monday declined to close at a two-week low, with the trading sentiment in the forex market being weighed down by the early closure of the RBI’s concessional swap facility for attracting fresh Foreign Currency Non-Resident-Bank (FCNR-B) deposits and importer demand for Dollars.
The rupee closed at 95.61 per dollar , down 18 paise over the previous close of 95.43. Intra day, rupee tested a high/ low of 95.48/95.62.
Traders indicated that RBI was present in the market, stabilising the rupee through dollar sales.
The RBI, on August 14th, decided to pull the plug on the limited period concessional swap facility it is offering banks to attract inflows into FCNR-B deposits a month ahead of its scheduled closure.
This announcement came in the wake of robust accretion of $52.30 billion in these deposits between June 8, 2026 till August 13, 2026.
The central bank said the concessional swap facility will now be available only for FCNR -B deposits of 3-5 years maturity mobilised till August 31, 2026, against the earlier deadline of September 30, 2026.
Correspondingly, the swaps under this facility — FCNR-B deposits, may be availed by banks with RBI till September 11, 2026, against October 16, 2026 earlier.
Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI, said while there may be valid reasons to justify an early closure of the concessional swap facility, the most likely reason could be that the target for FCNR(B) mobilization has already been achieved with inflows at $57 billion.
He assessed that another $25-30 billion could easily flow in the remaining days of August taking the total collections to around $85 billion. The balance of payment will be in surplus of around $50 billion with CAD at 1 per cent of GDP.
“We don’t believe that the cost of swap could have been a constraining factor. Our estimates show that the cumulative cost would amount to around 15 per cent of the corpus, or $10.5 billion.
“While this appears sizeable in absolute terms, it needs to be viewed against the scale of India’s foreign-exchange reserves rather than the FCNR(B) corpus alone,” Ghosh said.
SBI’s Economic Research Department estimated that with current forex reserves at around $700 billion and incremental reserve accumulation assumed at roughly $20 billion annually, the five-year cumulative hedging cost of $10.5 billion would amount to only 1.45 per cent of the current reserve stock and around 1.27 per cent of the projected reserve stock. This is minimal.