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Banking & RBI

Currency swap arrangements of the RBI

How the RBI uses currency swaps (SAARC framework, the Japan line, FCNR(B) and oil-company dollar windows) to support the rupee and neighbours, a regular source of banking-awareness questions.

Pareto Academy · updated 26 October 2026

At a glance

A currency swap is an agreement to exchange one currency for another now and reverse the exchange later at an agreed rate. The RBI uses swaps in two ways: as a lender, giving short-term liquidity to neighbouring central banks (the SAARC framework), and as a backstop for India itself (the Japan line, special windows for FCNR(B) deposits and for oil companies). The aim is to steady exchange rates and reserves without permanently spending reserves.

Key facts

  • SAARC currency swap framework: running since 15 November 2012
  • Current SAARC framework: 2024–2027, announced on 27 June 2024
  • SAARC windows: a rupee window with a corpus of ₹25,000 crore, and a US dollar/euro window with a corpus of US$2 billion
  • Eligibility: any SAARC member that signs a bilateral swap agreement with the RBI
  • Maldives line: ₹3,000 crore, signed in October 2024 with the Maldives Monetary Authority; first drawn in April 2026
  • India–Japan bilateral swap arrangement: up to US$75 billion; latest renewal effective 28 February 2026 (two-way; each side swaps its own currency for US dollars)
  • FCNR(B) swap window 2013: opened 4 September 2013; with a related bank-borrowing window it brought in about US$34 billion
  • FCNR(B) swap window 2026: opened 8 June 2026; fresh deposits under it stopped on 31 August 2026
  • Oil-company dollar window: first used in August 2013; reopened from 12 October 2026 for IOC, HPCL and BPCL

How it works

Swaps to other countries. A SAARC central bank draws dollars, euros or rupees from the RBI against its own currency and repays later with interest. It is meant for short-term liquidity or balance-of-payments stress, not long-term aid. Rupee drawals get concessions, which also promotes the rupee's use in the region.

Swaps that help India.

Facility Who gets dollars Why it helps the rupee
India–Japan BSA RBI can draw dollars if needed Second line of defence for reserves
FCNR(B) swap window Banks swap NRI dollar deposits with the RBI at a concessional rate The RBI bears the hedging cost, so banks can offer higher rates and NRI dollars flow in
Oil-company window IOC, HPCL, BPCL buy dollars from the RBI through designated banks Their large daily dollar demand is kept out of the spot market

FCNR(B) deposits are foreign-currency term deposits of NRIs, so the bank, not the depositor, carries the exchange risk. A swap with the RBI removes that risk for the bank, which is why these windows attract large sums.

Timeline

  • 2012: SAARC currency swap framework begins
  • 2013: rupee crisis; oil-company dollar window (August) and FCNR(B) swap window (September–November)
  • 2018: India and Japan agree a US$75 billion bilateral swap
  • 2024: SAARC framework renewed for 2024–27 with a separate rupee window; Maldives agreement signed
  • 2026: FCNR(B) swap window reopened (June) and oil-company dollar window reopened (October)

Recent developments

  • 24 Oct 2026: Kotak Mahindra Bank said it raised about ₹55,344 crore of FCNR(B) deposits under the 2026 swap facility, which lowered its NIM.
  • 23 Oct 2026: First rollover of the ₹3,000 crore Maldives swap took effect, at Malé's request (announced by the MEA on 16 October).
  • 12 Oct 2026: The RBI began meeting the entire daily dollar requirement of IOC, HPCL and BPCL through a special window (announced 10 October), until further notice.
  • 31 Aug 2026: The FCNR(B) swap window stopped taking fresh deposits.
  • 8 Jun 2026: The RBI opened a concessional FCNR(B) swap window.
  • 28 Feb 2026: India–Japan swap renewed at up to US$75 billion.

Exam traps

  • The SAARC framework dates from 2012, not 2013; 2013 is the year of the FCNR(B) and oil-company windows.
  • The India–Japan line is US$75 billion; the SAARC dollar/euro window is only US$2 billion in all.
  • FCNR(B) deposits are in foreign currency (bank bears the exchange risk); NRE deposits are in rupees (depositor bears it).
  • In a swap the money is returned later; it is not a grant or a permanent reserve sale.

Quick check

  • Q: Since when has the RBI run the SAARC currency swap framework? A: 2012.
  • Q: What is the size of the India–Japan bilateral swap arrangement? A: Up to US$75 billion.
  • Q: Which three companies use the RBI's special dollar window opened in October 2026? A: IOC, HPCL and BPCL.

Further reading

Sources

In the news

Every time this topic has appeared in our current affairs, newest first:

  1. 25 October 2026Kotak Mahindra Bank's Q2 consolidated profit rises 26% to ₹5,645 crore
  2. Week of 15–21 October 2026India rolls over ₹3,000 crore currency swap for the Maldives
  3. Week of 8–14 October 2026RBI opens a special dollar window for IOC, HPCL and BPCL