RBI Raised $100 Billion in Eleven Weeks.
What Is It Preparing For?
In June the RBI opened a subsidised swap window for FCNR(B) deposits, the dollar deposits Indian banks take from non-resident Indians. It projected $80 billion, raised more than $100 billion, and shut the window a month early. India could fund itself without any of it. The current account deficit is running at 0.5% of GDP and reserves were already adequate when this began. The pressure sits in the capital account, where portfolio investors have been selling for two years.
What does the data actually show?
RBI balance of payments data for the June quarter, released 1 September 2026
Portfolio money is leaving, and direct investment is too small to replace it.
Net flows, $ billion. The last pair covers the June quarter
Three of the four ways capital enters India were thinning at once.
Net inflows, June quarter against a year earlier, $ billion
What was the swap window, and what does it cost?
The mechanics, and which side of the trade carries which risk
An NRI places dollars in an FCNR(B) deposit of three to five years. The bank sells those dollars to the RBI at the spot rate and receives rupees. At maturity the trade reverses at the same rate, so the bank carries no currency risk and the RBI carries all of it. The RBI also absorbs the hedging cost in full, quoted at roughly 3.5% a year before the window opened. In 2013 the equivalent swap was priced at a concessional 3.5%, about three points below market, and raised $26 billion when US rates were near zero.
What the RBI got
- More than $100 billion of dollars it controls for three to five years
- Reserves rebuilt to a record after two years of depletion
- Room to manage a net short forward book of about $106.6 billion
- A capital account topped up while the repo rate stayed at 5.25%
What it owes
- The dollars go back in 2029–31 at a rupee rate fixed today
- It carries the full hedge, so it forgoes the forward premium for the whole term
- If the rupee weakens, the revaluation gain on those dollars is cancelled
- Lending against these deposits is permitted with no prescribed leverage limit
Frank TakeThis is cover for a long conflict, bought while it could still be bought.
India can pay its bills. Remittances and services earnings cover the trade gap, and the current account deficit is small enough to be unremarkable. The trouble sits on the other side of the ledger. Foreign investors have been selling Indian assets for two years, and the money meant to replace them has been arriving and leaving again in almost equal measure. What comes in is hot. What stays is thin.
No interest rate could fix that. The war lifted oil, oil lifted US inflation, and the Fed stopped cutting. That raises the reward for holding dollars everywhere in the world. India cannot match it by lifting the repo without slowing an economy already paying more for its energy. So the only lever left was to pay above the market price for dollars, and absorbing the entire hedging cost is exactly what that looks like.
Then consider how it ended. The Governor expected $80 billion. He took in more than $100 billion and shut the window a month early. A central bank that stops buying has enough of what it came for, and the question worth asking is what it believes enough is for. The war has no end date and oil has no ceiling. This money was bought while it could still be bought, and it goes back in dollars between 2029 and 2031, at a rate agreed today.
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