FCNR(B): Revisiting a proven crisis management tool

The RBI has revived an FCNR(B)-style deposit framework to attract NRI foreign currency deposits and support external stability, echoing the successful 2013 taper tantrum response that drew over USD 25 billion in inflows. However, the current macro backdrop differs markedly — forex reserves stand at approximately USD 680 billion (more than double 2013 levels), and the India-US interest rate differential has narrowed significantly from over 700 bps, potentially limiting the scale of inflows. The article notes that while the scheme provides valuable stabilisation, it is a liability instrument and its effectiveness depends on favourable conditions at maturity.