The Reserve Bank of India (RBI) on Monday introduced a US dollar-rupee forex swap facility for fresh FCNR (B) deposits with maturities of three to five years to attract foreign capital and support the rupee.

Under the arrangement, a bank can sell US Dollars in multiples of USD one million to the RBI and simultaneously agree to buy back the same amount at the end of the swap period, a central bank circular said.

The pricing of such deposits is left to the banks according to their internal policies, subject to the RBI’s existing interest-rate ceilings.

The swap facility will be available to authorised dealer category-I banks for eligible fresh foreign currency non-resident (Bank) or FCNR (B) deposits mobilised in any freely convertible currency.

While deposits can be raised in any freely convertible currency, the RBI’s swap facility will be available only in US dollars. 

The swap facility will remain open for deposits mobilised until 30 September.

"The underlying deposits will have a lock-in period of one year. The banks may, at their discretion, allow premature withdrawal of such deposits after one year, as per their internal policy," the RBI said.

However, swaps undertaken with the RBI cannot be cancelled.

RBI also said that fresh FCNR (B) deposits of minimum tenor of three years and maximum tenor of five years mobilised (including deposits that are renewed upon maturity) by the banks from till September 30, 2026 will be exempted from maintenance of CRR (cash reserve ratio) and SLR (statutory liquidity ratio). 

Last week, the RBI announced a series of measures to attract overseas funds and ease external financing conditions.

In another circular on Monday, the RBI said it will offer banks a dollar-rupee swap facility for external commercial borrowings (ECBs) of average maturity of three years and above by public sector undertakings (PSUs). 

This swap facility will be offered by the RBI at a fixed cost of 1.5% per annum compounded semi-annually.  

The swap facility has also been introduced for Overseas Foreign Currency Borrowings (OFCBs) raised by Authorised Dealer Category I banks for a minimum maturity of three years.