The Rupee has depreciated about 7.4 per cent to ₹91.81 per dollar as of March 10, 2026, from 85.49 as of March-end 2025  | Photo Credit: FRANCIS MASCARENHAS

The Reserve Bank of India (RBI) may look to revive a strategy it last employed in 2013 to attract dollar inflows into the country via the Foreign Currency Non-Resident (Banks) and Non-Resident External deposit routes. This could help stabilise the rupee, which is facing headwinds due to the ongoing West Asia conflict.

Exempting the aforementioned categories of non-resident (NR) deposits from statutory pre-emptions – cash reserve ratio (CRR) and statutory liquidity ratio (SLR) and the RBI opening a special window for banks to swap fresh, long-tenor FCNR(B) dollar funds at a fixed rate, could be two options for the central bank to break the fall in the rupee and bolster its ability to intervene in the market, say experts.

The rupee has depreciated about 7.4 per cent to ₹91.81 per dollar as of March 10, 2026, from 85.49 as of March-end 2025 amid a widening merchandise trade deficit, including due to the US slapping steep tariffs on Indian goods, and FPIs (foreign portfolio investors) selling in the domestic equity markets.

A weak rupee and high energy prices amid the US-Israel alliance’s attack on Iran and retaliatory strikes by the latter can stoke inflation. India imports almost 90 per cent of its crude oil requirement.

Temporarily exempting FCNR (B) and NRE deposits from SLR (for every ₹100 deposit banks mobilise, they have to park ₹18 in Central and State Government Securities) and CRR (Rs 3 with RBI), will enable them to direct the entire deposit they raise into credit.

V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank, observed that there have been net (dollar) outflows under the foreign direct investment (FDI) and the foreign portfolio investment (FPI) routes in the third quarter of FY26. So, to further bolster its firepower to intervene in the market, the central bank can consider incentivising banks to mobilise FCNR(B) deposits by providing them with a temporary exemption from maintaining the statutory reserve ratios.

K. Arvind, Executive Vice-President (Head – Treasury), Tamilnad Mercantile Bank, opined that if RBI offers banks a window to swap fresh FCNR(B) dollar funds, it will be beneficial for all stakeholders. The RBI’s ability to defend the domestic currency due to the swap will be further bolstered. Additionally, it will generate rupee liquidity for the banking system, and NRIs will get better returns.

He noted there will be an element of uncertainty about the future in the minds of Non-Resident Indians due to the global ramifications of the West Asia conflict. So, they may channelise their overseas savings/investments into NR deposits with Indian Banks

In the first nine-months of FY26, overall NR deposit inflows were about 16 per cent lower year-on-year (yoy) at $11.204 billion against $13.333 billion in the year ago period, per RBI data. Within this, FCNR(B) deposits accretion was 68 per cent down yoy at $2.042 billion. However, NRE and NRO deposits were up 42 per cent (at $5.065 billion) and 24 per cent ($4.097 billion), respectively.

Banking expert V Viswanathan attributed the lower accretion in NR deposits to the interest rate reduction in India. Out of that, inflows are higher in NRE and NRO deposits as Rupee depreciation more than compensated for the interest rate reduction in these deposits.

Published on March 10, 2026