Launched on June 5, 2026, the RBI’s scheme eliminates the hedging costs that banks normally pass on to depositors of Foreign Currency Non‑Resident (Bank) accounts, allowing interest rates of up to 7.5% for three‑ to five‑year maturities.
The removal of hedging friction proved decisive: inflows rose to roughly $40.8 billion by early August and surged to $127 billion by early September, shattering previous records for FCNR(B) deposits.
Prime Minister Narendra Modi personally appealed to overseas Indians at a Paris event in June 2026, urging them to invest in India’s growth, while Finance Minister Nirmala Sitharaman instructed state‑owned banks to intensify outreach to potential diaspora depositors.
The diaspora, estimated at 35‑37 million people across more than 150 countries, has become increasingly affluent; remittances in FY 2025‑26 topped $135‑$155 billion, cementing India’s position as the world’s largest recipient of overseas worker remittances.
The influx bolstered the capital account, which posted a $27.7 billion surplus in July 2026, averting what could have been a deficit and providing a critical buffer for foreign‑exchange reserves.
Despite the capital‑account gain, the rupee has not benefited, slipping to around 95‑96 per dollar after a 6% decline in 2026, a movement driven largely by soaring oil prices as India imports about 85% of its oil needs.
The scheme creates a structural liability: the dollar‑denominated deposits are liabilities for Indian banks that will need to be repaid at maturity, potentially prompting future outflows. The RBI managed a similar risk during the 2013 taper‑tantrum campaign, which raised $26‑$34 billion and matured during a period of relative rupee stability.
While the record‑breaking diaspora inflows have strengthened reserves, the persistent rupee weakness underscores the limits of such capital‑account measures in the face of external price shocks and highlights the need for broader macro‑economic adjustments.