New Delhi: Union Finance Minister Nirmala Sitharaman will chair a meeting of the heads of public sector banks (PSBs) and financial institutions on July 13 to review the progress of the ongoing foreign currency deposit mobilisation campaign aimed at attracting overseas funds into the Indian banking system.
The meeting comes after the Reserve Bank of India (RBI) introduced a series of measures last month to encourage higher inflows through Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, Overseas Foreign Currency Bonds and External Commercial Borrowings (ECBs).
The review assumes significance as FCNR(B) deposit inflows weakened sharply during the last financial year.
Focus on attracting overseas deposits
According to sources, the Finance Minister will review the efforts of public sector banks and financial institutions, including IDBI Bank, to mobilise foreign currency deposits from Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and Persons of Indian Origin (PIOs).
The discussions are expected to cover the mobilisation of:
- Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits
- Overseas Foreign Currency Bonds
- External Commercial Borrowings (ECBs)
The objective is to strengthen foreign currency inflows and improve access to overseas capital.
RBI eases FCNR(B) deposit norms
To encourage banks to attract more foreign currency deposits, the RBI last month removed, until September 30, 2026, the interest rate ceiling on fresh FCNR(B) deposits with maturities ranging from three to five years.
The temporary relaxation allows banks greater flexibility in offering competitive interest rates to overseas depositors.
The move was announced after FCNR(B) inflows declined significantly during FY26.
According to available data, net FCNR(B) inflows fell to USD 946 million in FY26, compared with USD 7.1 billion in FY25, highlighting the need for measures to revive overseas deposits.
Concessional forex swap facility
Alongside the interest rate relaxation, the RBI introduced a concessional foreign exchange swap facility for banks mobilising FCNR(B) deposits with maturities between three and five years.
The facility enables banks to hedge their foreign currency exposure at a lower cost, making it more attractive to raise foreign currency deposits.
Lower hedging costs are expected to improve banks’ competitiveness in attracting overseas funds while reducing the risks associated with currency fluctuations.
Push for external commercial borrowings
The RBI has also announced a concessional forex swap facility to encourage public sector undertakings (PSUs) to raise External Commercial Borrowings (ECBs) until September 30, 2026.
Central Public Sector Enterprises (CPSEs) typically raise between USD 10 billion and USD 12 billion annually through overseas borrowings.
With the current policy support and an estimated 3 per cent cost advantage, several state-owned enterprises are expected to advance their overseas borrowing plans to take advantage of favourable market conditions.
SBI Research sees improved overseas funding
According to a report by SBI Research, the concessional forex swap facility is expected to encourage higher ECB issuances by public sector enterprises.
The report said easier access to overseas funding at competitive costs could help reverse the decline in external borrowings witnessed during the previous financial year.
Total ECB and Foreign Currency Convertible Bond (FCCB) inflows declined by around 30 per cent in FY26, falling to USD 42.9 billion from USD 61.2 billion in FY25.
Analysts believe the latest RBI measures could support a recovery in overseas capital inflows by making foreign currency funding more attractive for both banks and public sector enterprises.
Meeting to assess progress
Monday’s review meeting is expected to assess how effectively banks have implemented the RBI’s measures and identify further steps to strengthen foreign currency deposit mobilisation.
The discussions are also likely to focus on improving overseas investor participation and enhancing access to foreign capital, supporting India’s broader external financing requirements.