Date - Aug 15, 2026 on [On LinkedIn](https://lnkd.in/p/dJFY4ifv) <span style="color:#C21E56;">There is unfair criticism of RBI over its Aug 5 and Aug 14 statements on the termination of the FCNR(B) scheme. Here I explain why this is not correct.</span> [Aug 5, 2026](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=1566) - Sanjay Malhotra, Governor of the RBI, stated during a [post-monetary policy press conference](RBI_MPS_20260805_Press%20Conference.pdf) "...As of now, there is no proposal under consideration to close the scheme prematurely. We will keep you posted on this." [Aug 14, 2026](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=63378) - RBI announced it would prematurely end its swap facility for FCNR(B) deposits announced on [June 8, 2026](FCNR%20(B)%20Swap%20Facility%20-%20June%208,%202026.md) on August 31, 2026. ==What happened between in first week of August?== - The first $17 billion overall took 38 days (June 9 to July 17, 2026) while the next approx. $18 billion took just 14 days (July 18 to July 31) as the FCNR(B) deposits under the scheme stood at $36.7 billion by end of July 31, 2026. - By August 13, cumulative FCNR(B) mobilization hit **$52.3 billion** . So it is clear the past 13 days, that is from August 1 to 13, alone added $16 billion. - Now major lenders like HDFC Bank (August 1, 2026), ICICI Bank (August 4, 2026) and Axis Bank (Aug 3, 17) revised rates upward specifically in the [first week of August](https://economictimes.indiatimes.com/wealth/invest/hdfc-bank-icici-bank-raise-fcnr-b-interest-rates-depositors-to-get-up-to-6-25-rates-on-select-tenures-check-details/articleshow/132823775.cms?from=mdr) to chase the scheme before any cutoff. - So banks were competing hard for this money _because_ RBI was absorbing their hedging cost. There is also [exemption on CRR and SLR on these deposits.](Cash%20Reserve%20Ratio%20(CRR).md#CRR%20Exemptions), along with NRE(RA) term deposits, announced on [June 8, 2026](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=13471) and [June 19, 2026](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=13516) respectively. - So, in a way, higher rates would still make it a desirable source of funds compared to domestic term deposits, making it a free marketing war for NRI dollars. - With announcement of higher rates, RBI moved quickly (not wait till Sept.) once it saw where that trajectory was heading. - It was clear that there was going to be a spike in the period after Malhotra's Aug 5 statement, not before it. But Bankers had cited expectations of $65-70 billion under the scheme by September. The expected inflow and the pipeline for deposit schemes comes from banks to RBI, and it is not the other way around. Banks expected a timeline of September 2026 to reach the threshold (minimum amount) which is set internally by RBI. This internally pre-decided amount does not get disclosed, or else it will lead to reverse calculations by market on what is the "comfortable level of reserves" a central bank is targeting. [FCNR (B) deposits](Deposits%20and%20Accounts.md#^712aaa) are part of relationship banking. Rather, the 2013 FCNR(B) scheme was also suggested by few bankers to the North Block. It was not the then RBI governor Rajan's idea. Rather, he was very reluctant to implement it. He has admitted to it. On the "credibility" framing, the language itself was conditional, not absolute. He used the word "as of now..". Isn't that a standard textbook style central bank language? It is also the same construction used before every rate decision globally. It is genuinely a data-driven reversal. Yes, it is unusually fast one that understandably reads as "flip-flopping by RBI" from the outside. But it is not "loss of credibility" as cited on social media. RBI doesn't have the benefit of hindsight, and it never promised a calendar. It promised to watch the data. That's exactly what RBI did. ## Related Notes 1. [FCNR (B) Swap Facility - June 8, 2026](FCNR%20(B)%20Swap%20Facility%20-%20June%208,%202026.md) 2. [FCNR (B) Deposits (2013) - Forex-Special Swap Window](FCNR%20(B)%20Deposits%20(2013)%20-%20Forex-Special%20Swap%20Window.md) 3. [Forex Swaps](Forex%20Swaps.md) 4. [Deposits and Accounts](Deposits%20and%20Accounts.md) 5. [On LinkedIn](https://lnkd.in/p/dJFY4ifv)