Dollar-rupee swap window opened for PSUs' overseas borrowings till December
Jun 8, 2026
The concessional dollar-rupee swap window, available until January 2027, aims to encourage overseas borrowings by PSUs and banks while supporting foreign capital inflows
The concessional dollar-rupee forex-swap facility, announced last week by the Reserve Bank of India (RBI) for public-sector entities and banks, was put into effect on Monday.
The facility is for eligible external commercial borrowing (ECB) by public-sector undertakings (PSUs) and the overseas foreign-currency borrowing (OFCB) of banks, setting the swap rate at 1.5 per cent per annum, compounded twice a year.
The facility will be available for ECB with an average maturity of three years and more, drawn till December 31, 2026, by eligible PSUs, as well as for OFCB done by “authorised dealer category-I” banks and having a minimum maturity of three years.
According to the RBI, the facility will be available for ECB and OFCB in any currency, although the swap with the RBI will be undertaken only in dollars.
The maximum tenor of the swap will be aligned with the repayment schedule or maturity of the borrowing, subject to a cap of five years.
“The swap will be undertaken at a fixed rate of 1.5 per cent per annum compounded semi-annually,” the RBI said. Under the arrangement, banks can sell dollars to the RBI and simultaneously agree to buy back the same amount at the end of the swap period.
In the first leg, dollars will be sold at the FBIL (Financial Benchmarks India Ltd) reference rate, while in the reverse leg banks will return rupee funds along with the swap premium to obtain the dollars back.
The central bank said the facility “comes into effect from the date of this circular and will remain open up to January 15, 2027 for eligible ECB drawdowns made and OFCB flows received up to December 31, 2026”.
The swap window will not be available for borrowing with embedded options or for ECB raised for refinancing or repaying existing foreign-currency loans, according to the circular.
PSUs, which typically raise $10 billion-12 billion annually through ECB, are expected to fast-track borrowing plans. They may tap global markets more vigorously while the window remains favourable.
In calculating banks’ net overnight open position (NOP) in rupees, the RBI allowed lenders to exclude positions arising from its newly announced foreign currency swap facilities for foreign currency non-resident (banks) deposits, ECB, and overseas foreign currency borrowing.
On March 27, the RBI directed banks to maintain their net open position in rupees (NOP-INR) in the onshore deliverable market within $100 million at the end of each business day, with compliance required by April 10.
[The Business Standard]
