FCNR, ECB measures to draw $90-95 b capital inflows in FY27: Report
The RBI’s concessional swap windows for FCNR (B) deposits, external commercial borrowings and overseas foreign currency borrowings are likely to draw capital inflows of USD 90-95 billion in 2026-27, according to a report.
CareEdge, in its report, has revised its projections for FCNR flows, considering the inflows observed in the last two months. It now expects FCNR (B) inflows to reach around USD 80 billion, while external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) are projected at USD 10-15 billion.
Taken together, the measures are likely to generate USD 90-95 billion of capital inflows in FY27.
The report said that considering the inflows received so far and expected to come, India’s capital account surplus is now likely to increase to approximately USD 108 billion compared to a surplus of just USD 2 billion in the previous year.
As a result, India’s balance of payments (BoP) is expected to improve to a surplus of USD 64 billion in FY27 compared to deficits of USD 23.6 billion and USD 5 billion in FY26 and FY25, respectively, the report added.
Between June 5 and July 31, 2026, these measures have attracted USD 40.8 billion, with FCNR (B) inflows accounting for USD 36.7 billion, and ECBs and OFCBs together accounting for USD 4.1 billion.
Large banks are currently offering deposit rates in the 6.0-6.5 per cent range, while some smaller and newer banks are offering rates close to 7 per cent for FCNR deposits.
Additionally, the availability of significant leverage for investors, with some foreign banks reportedly offering leverage as high as 19x-29x in some cases, appears to have enhanced the attractiveness of the scheme and supported stronger-than-expected participation, the report said.
The inflows received through these measures will have a positive impact on banking system liquidity, with CareEdge expecting core liquidity to boost around Rs 8.6 lakh crore.
However, this could be partly offset by a seasonal rise in currency demand and the maturity of the RBI’s short forward book. The report estimates that currency in circulation (CiC) could rise by around Rs 1.1 trillion in December from levels in June amid a seasonal uptick in festive periods.
The report said that assuming maturity of around USD 30 billion in the RBI’s forward position (short-forward book maturing in 3 months and within 1 year stands at USD 16 billion and USD 40 billion, respectively), this could create a drag of roughly Rs 3 trillion. After accounting for the incremental CRR requirement on deposit growth, CareEdge estimate core liquidity could still reach a surplus of around Rs 9 lakh crore.
This is expected to prompt the RBI to use liquidity management tools such as long-tenor variable rate reverse repo (VRRR) or Open Market Operation (OMO) sales to absorb excess liquidity, the report said.
