Banks rally after RBI unveils forex swap facilities for FCNR(B) deposits, overseas borrowings

Banking stocks advanced after the Reserve Bank of India issued operational guidelines for its newly announced forex swap facilities covering FCNR(B) deposits, external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs).

The Nifty Bank index climbed 1.18% to 54,700.40, recovering from a 0.79% decline in the previous session.

Among the gainers, IDFC First Bank jumped 3.68%, followed by Federal Bank (up 2.36%), Bank of Baroda (up 2.01%), Yes Bank (up 1.74%), Punjab National Bank (up 1.68%), IndusInd Bank (up 1.61%), AU Small Finance Bank (up 1.58%) and Canara Bank (up 1.50%). ICICI Bank, Union Bank of India, Kotak Mahindra Bank, Axis Bank and State Bank of India also traded higher. HDFC Bank was the lone laggard among index constituents, slipping 0.29%.

Investor sentiment improved after the RBI detailed two dollar-rupee swap facilities announced by Governor Sanjay Malhotra in the monetary policy statement on 5 June 2026.

Under the first scheme, the RBI introduced a US Dollar-Rupee forex swap facility for eligible ECBs raised by public sector undertakings and overseas foreign currency borrowings raised by authorised dealer category-I banks. The facility will be available for borrowings with a minimum maturity of three years and will remain open for eligible inflows received up to 31 December 2026.

Banks can sell US dollars to the RBI and simultaneously agree to buy them back at the end of the swap period. The swap will be priced at a fixed rate of 1.5% per annum, compounded semi-annually, with a maximum tenor of five years.

In a separate measure, the central bank launched a forex swap facility for fresh FCNR(B) deposits mobilised by banks. The facility covers deposits with maturities ranging from three to five years and will remain open for deposits raised up to 30 September 2026.

The FCNR(B) swap facility will be conducted at par, allowing banks to swap foreign currency inflows with the RBI while maintaining exposure to the underlying deposits. The scheme is expected to encourage foreign currency inflows and strengthen liquidity conditions.

Traders viewed the measures as supportive for banks as they are expected to lower hedging costs and encourage overseas fund-raising.

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