Central BanksMedium•26 October 2026•
1 min read
Indian Banks Scale Back Forex Swaps Following RBI Regulatory Pressure
Key Facts
1Indian banks are reducing participation in buy-sell forex swaps following signals from the Reserve Bank of India.
2Banks utilized rupee liquidity from $132 billion in FCNR deposits to purchase dollars and invest in US Treasury bills.
Indian banks are reducing their participation in buy-sell foreign exchange swaps following signals from the Reserve Bank of India. The Economic Times reported that lenders utilized rupee liquidity from $132 billion in Foreign Currency Non-Resident (FCNR) deposits to purchase dollars and invest in US Treasury bills.
The RBI aims to ensure that domestic rupee liquidity is directed toward local lending activities rather than being deployed in foreign debt markets for arbitrage. This regulatory shift occurs alongside resilient economic data, as the Composite PMI reached 56.7 on October 23, 2026, exceeding the forecasted 56.2.