India’s forex reserves have surged to a record $729.3 billion after non-resident Indians (NRIs) poured $100 billion into the RBI’s FCNR(B) scheme, far exceeding expectations and prompting the central bank to close the window a month early.

Reports indicate that this inflow has given the RBI fresh firepower to stabilise the rupee amid oil-driven volatility and geopolitical tensions.

The Reserve Bank of India launched the Foreign Currency Non-Resident (Bank) or FCNR(B) program in June 2026 to attract overseas deposits from NRIs. By 31 August, collections had crossed the $100-billion mark, well above the $80 billion initially projected by RBI Governor Sanjay Malhotra.

The scheme’s success was so pronounced that the RBI decided to shut the FCNR(B) window ahead of its original 30 September deadline, citing concerns over reversal risks from excessive inflows. Banks, however, will continue to access the swap facility for contracted deposits until 11 September.

The inflows have significantly boosted India’s forex reserves, which now stand at $729.3 billion, compared to $682 billion in late July when reserves had been depleted by $46 billion due to the US-Iran war and rising global energy prices.

This replenishment has provided the RBI with greater ammunition to intervene in currency markets. On Tuesday, the rupee strengthened by 0.4% to 94.7988 against the US dollar, its strongest level since 1 July, supported by RBI’s dollar sales in offshore and onshore markets.

The FCNR(B) scheme allowed NRIs to deposit their overseas earnings in foreign currencies such as US dollars, with both principal and interest paid in the same currency. This protected depositors from rupee fluctuations while offering attractive tax-free returns.

To make the scheme more appealing, the RBI absorbed forex hedging costs normally borne by banks, particularly for deposits with three- to five-year tenures. By August 21, inflows through FCNR(B) accounted for $65.4 billion, while external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) contributed $2.59 billion and $4.86 billion respectively.

This is not the first time India has tapped diaspora flows during economic stress. In 1991, during a balance-of-payments crisis, and again in 2013 amid the US Federal Reserve’s taper tantrum, similar measures raised billions from NRIs.

The current inflows are expected to comfortably finance India’s current-account deficit this financial year, strengthening the balance of payments and providing resilience against external shocks. Analysts note that the RBI’s calibrated move to close the window early was prudent, ensuring stability while preventing risks associated with sudden reversals.

The replenished reserves come at a crucial time, with elevated oil prices and geopolitical tensions continuing to weigh on India’s external sector. The RBI’s proactive measures have not only stabilised the rupee but also reinforced confidence in India’s ability to manage external vulnerabilities.

Agencies