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RBI exempts banks' swap deals from net unhedged FX exposure norm

· 5 min read·Source: The Economic Times
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The Reserve Bank of India (RBI) has decided that swap deals undertaken by banks to raise foreign-currency funds will not count towards their net overnight open position (NOP) in the foreign-currency market, exempting such positions from the unhedged-exposure limit. The RBI had earlier set the NOP limit to contain market volatility, but the restriction had constrained banks' ability to raise foreign currency through instruments such as FCNR(B) deposits and external commercial borrowing (ECB) swaps. By exempting these swap positions, the central bank aims to make it easier for banks to mobilise foreign currency and channel dollar inflows into the country, providing relief to lenders and supporting the rupee at a time of external pressure. The measure is part of a broader set of steps the RBI announced around its June policy to attract foreign capital rather than raising interest rates.

Key Facts & Details

8 points
  • 1
    The RBI exempted banks' swap deals for foreign-currency funds from the net overnight open position (NOP) limit.
  • 2
    The exemption covers swap positions linked to FCNR(B) deposits and ECB funding.
  • 3
    The NOP limit had earlier been set to contain market volatility.
  • 4
    The move makes it easier for banks to raise foreign currency and channel dollar inflows.
  • 5
    It is part of the RBI's package to attract foreign capital and support the rupee.

Deep Dive

  • +
    The relief encourages banks to mobilise FCNR(B) deposits from non-resident Indians.
  • +
    The RBI chose capital-flow measures over interest-rate hikes to defend the rupee.
  • +
    Easier foreign-currency raising helps strengthen India's external buffers.
Q

Exam Focus

From which limit did the RBI exempt banks' foreign-currency swap deals in June 2026?

Related Topics

RBIForeign ExchangeFCNR(B)Net Open Position

Exam Relevance & Angle

RBI regulatory measures on banks' foreign-exchange operations are a core banking-awareness topic, and concepts such as the net open position, FCNR(B) deposits and ECBs are directly tested in banking and RBI-grade exams, making this a high-value item for aspirants to understand.

Target Exams

SBI POIBPS POIBPS RRB OfficerRBI Grade BRBI AssistantNABARD Grade ALIC AAONIACL AOUPSC CSEState PCS

Background & Context

Banks dealing in foreign exchange maintain a net open position (NOP) — the difference between their foreign-currency assets and liabilities, including off-balance-sheet positions — which represents their exposure to currency-rate movements. To limit the risk that excessive open positions pose to a bank and to overall market stability, the RBI caps the NOP. FCNR(B) (Foreign Currency Non-Resident (Bank)) deposits are foreign-currency deposits that non-resident Indians (NRIs) can hold with Indian banks, on which the exchange-rate risk is borne by the bank, not the depositor; banks typically hedge this risk using currency swaps. External Commercial Borrowings (ECBs) are loans Indian entities raise from foreign lenders. By excluding swap positions taken to fund FCNR(B) and ECB flows from the NOP calculation, the RBI removes a regulatory disincentive, encouraging banks to attract more foreign currency — a tool to bolster reserves and support the rupee without resorting to interest-rate hikes.

Related GK Concepts

Must Know
Net open positionFCNR(B) depositsExternal Commercial BorrowingCurrency swapForeign exchange reserves

Test Yourself

1 / 2

The RBI's June 2026 relief exempted banks' foreign-currency swap deals from which limit?

Source

The Economic Times

This topic is important for:

SBI PO

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IBPS PO

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RBI Grade B

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RBI exempts banks' swap deals from net unhedged FX exposure norm — Current Affairs 2026-06-08