Dollar-Rupee Swap Facility for NRIs: Earn Up to 7% Returns on Foreign Deposits—Know Eligibility, Benefits & How It Works

India’s foreign exchange landscape is set for a major boost after the Reserve Bank of India (RBI) introduced a special Dollar-Rupee swap facility for banks accepting FCNR(B) deposits from Non-Resident Indians (NRIs). The move is expected to attract billions of dollars into India while offering NRIs higher returns of up to 7% on foreign currency deposits.

RBI Launches Dollar-Rupee Swap Facility for NRIs

The new facility allows banks to raise fresh foreign currency funds through Foreign Currency Non-Resident (Bank) — FCNR(B) deposits and swap them with the RBI at concessional rates. The primary objective behind the scheme is to strengthen the rupee, improve foreign exchange reserves, and reduce hedging costs for banks.

Under the mechanism, when NRIs deposit dollars with Indian banks, the banks transfer those dollars to the RBI through a forex swap arrangement. In return, the RBI assures banks that the same amount of dollars will be returned at the original exchange rate when the deposit matures. This protects banks from currency fluctuation risks.

How the RBI Swap Facility Works

The newly introduced RBI scheme works through a structured forex swap mechanism designed specifically for FCNR(B) deposits:

Banks can participate only in multiples of $1 million, with a minimum transaction size of $1 million.

The deposit tenure must range between 3 years and 5 years.

Although NRIs may deposit funds in currencies such as Pound Sterling or Euro, the swap arrangement with RBI will be conducted only in US dollars.

Premature withdrawal is not allowed before one year.

Once the swap agreement is executed between the bank and RBI, it cannot be cancelled midway.

This structure helps banks access cheaper foreign currency funding without bearing heavy hedging expenses.

NRIs Could Earn Up to 7% Interest

One of the biggest attractions of this facility is the potential rise in FCNR(B) deposit interest rates. Currently, most banks offer interest rates between 3.85% and 5% on dollar deposits. However, the RBI is offering banks a subsidy of 1.5% annually on swap costs, significantly reducing funding expenses.

According to banking experts, this could push FCNR(B) deposit rates to around 6%–6.5%, while intense competition among banks may even drive rates close to 7% for select tenures.

Current FCNR(B) Deposit Interest Rates

Bank of Baroda — Up to 5%

State Bank of India — Around 4.40%

Kotak Mahindra Bank — Around 4.40%

Axis Bank — Around 4%

HDFC Bank — Around 3.95%

ICICI Bank — Up to 3.85%

With the RBI’s new scheme, banks may soon revise these rates upward to attract more NRI deposits.

Why RBI Introduced This Facility

The RBI’s forex swap window is aimed at strengthening India’s external financial position amid global economic uncertainty and volatile currency markets.

The key objectives include:

Boosting India’s foreign exchange reserves

Supporting rupee stability

Helping banks mobilize cheaper foreign currency funds

Reducing external borrowing costs

Encouraging higher NRI participation in Indian banking products

Analysts believe the move could bring billions of dollars into the Indian banking system over the next few years.

Big Opportunity for NRIs

For NRIs looking for safe foreign currency investment options, FCNR(B) deposits have now become more attractive due to:

Higher expected interest rates

Protection from exchange rate fluctuations

Tax-free interest income in India

Secure investment through Indian banks

RBI-backed forex swap support

Financial experts say NRIs seeking stable returns in dollar-denominated deposits may benefit significantly from this scheme, especially if banks begin offering rates near 7%.