RBI Governor rules out early withdrawal of FCNR(B) deposit scheme
New Delhi, Aug 5, 2026
The RBI said its FCNR(B) deposit scheme will continue as planned after attracting billions in NRI deposits. It is also preparing to introduce polymer banknotes by early FY28
The Reserve Bank of India (RBI) has no plans to prematurely end its special Foreign Currency Non-Resident (Bank), or FCNR(B), deposit scheme, Governor Sanjay Malhotra said on Wednesday. His clarification comes amid speculation that the RBI could withdraw the special facility ahead of schedule after it attracted nearly $28 billion in deposits in under two months.
In the post-Monetary Policy Committee (MPC) press conference, Malhotra said India's foreign exchange reserves remain at comfortable levels, underscoring the country's strong external position.
What is the FCNR(B) scheme?
The FCNR(B), or Foreign Currency Non-Resident (Bank), scheme allows NRIs to open fixed deposits with Indian banks in designated foreign currencies such as the US dollar, the British pound, the euro, the Japanese yen, the Australian dollar, and the Canadian dollar. Since these deposits are maintained in foreign currency, depositors are protected from exchange rate fluctuations between the Indian rupee and the deposit currency.
In June this year, the RBI introduced a special US dollar-rupee swap facility for banks raising fresh FCNR(B) deposits with maturities of three to five years. The move was aimed at encouraging banks to mobilise more foreign currency deposits by reducing exchange rate risk. The response has been robust, with banks mobilising around $40 billion under the scheme in July alone.
Malhotra's remarks are significant because the FCNR(B) scheme is viewed as a key tool for boosting India's foreign exchange reserves, particularly during periods of global financial uncertainty or capital outflows.
Polymer note rollout by early FY28
Malhotra also said the RBI is targeting the launch of polymer currency notes by early FY28. The announcement comes after approval was granted for field trials of ₹10 and ₹20 polymer banknotes, although there is no proposal to replace all existing paper currency with polymer notes.
Polymer banknotes are made from a durable plastic substrate rather than cotton-based paper. They generally last longer, resist dirt, moisture, and tearing better, and can incorporate advanced security features to make counterfeiting more difficult. Their durability is also expected to reduce the frequency of currency replacement and lower printing costs over time.
[The Business Standard]
