Mumbai, Sep 24: Reserve Bank Deputy Governor Rohit Jain on Thursday said banks are expected to deploy additional liquidity from foreign-currency non-resident deposits over the next few months, as credit demand is likely to be strong during the festive season.
Under the special Foreign Currency Non-Resident (FCNR-B) deposit scheme, banks have mobilised USD 133 billion. The scheme was closed on August 31, one month ahead of the earlier schedule following a robust response from the Indian diaspora.
Talking to reporters on the sidelines of the 13th SBI Banking & Economics Conclave here, Jain said the RBI has held meetings with banks to discuss their liquidity position following the FCNR(B) inflows.
“Banks expected to deploy FCNR(B) liquidity over the next few months, helped by the upcoming festive season and strong credit demand,” he said, adding that the RBI is not directing banks towards any particular sector for deployment of the mobilised funds.
The deputy governor further said banks will have full discretion on deployment of FCNR(B) liquidity, based on their credit pipeline, proposals and liquidity outlook.
Banks’ asset-liability position will determine how they use the additional liquidity, he added.
Jain further said credit demand is broad-based, with all sectors and segments growing reasonably well, and the central bank does not see any particular sector requiring caution at present.
“Banks are themselves cautious on credit and underwriting, and the RBI expects healthy credit standards to continue,” the deputy governor said.
The RBI’s special USD-INR forex swap facility for FCNR (B) deposits, Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECBs) was launched on June 8, 2026.
The scheme was closed on August 31 for FCNR(B) deposits. However, the ECB and OFCB window will be open until December 31, 2026.
According to the RBI’s latest data reported by authorised dealer banks till September 18 on FCNR(B), ECBs and OFCBs, the total inflows stood at USD 143.596 billion.
In a panel discussion, Jain said India has become the fifth-largest holder of foreign exchange reserves globally.
He said forex reserves are managed with three principal considerations: safety, liquidity and return.
The deputy governor informed that the reserves are diversified across geographies, currencies and asset classes, with internal and external asset managers.
The RBI’s objective is to ensure external resilience and maintain confidence among foreign investors and counterparties, he added.
Jain also noted that the state government securities market remains fragmented, with weak secondary-market liquidity, and the RBI is encouraging states to undertake more reissuances to improve secondary-market activity.
The central bank is also pushing states towards a benchmark issuance strategy, similar to the Centre.
The RBI is positive about tokenisation and sees significant potential for the technology in the financial sector, he pointed out.
Tokenisation can enable digital ownership records, automated settlements and operational efficiencies.
The RBI, however, wants adequate safeguards and guardrails before wider adoption, Jain added.
The scale of the response prompted the RBI to close the FCNR(B) window a month earlier than originally planned. The facility was initially scheduled to remain open until September 30, but was brought forward to August 31 after the central bank said its objective had been achieved ahead of schedule.
FCNR(B) deposits are fixed-term deposits held in foreign currencies, with the principal and interest repaid in the same currency, shielding depositors from direct rupee exchange-rate risk. The arrangement allows non-resident Indians to place foreign-currency funds with Indian banks without taking direct rupee-currency risk.
