Special Swap
Facility
Prelims:
Indian Economy
Mains:
GS Paper
III-Indian Economy
Current relevance:
The
Reserve Bank of India (RBI) has mobilised over US$20 billion through its special
foreign exchange swap facility.
Highlights:
1.
The RBI stated that the scheme has seen strong
investor interest and has attracted steady foreign exchange inflows
since it became operational on June 8, 2026.
2.
The initiative was launched to:
i.
Strengthen India's balance of payments (BoP)
ii.
Increase foreign exchange reserves
iii.
Encourage banks to mobilize foreign currency from
overseas sources.
3.
Sources
of Foreign Exchange Mobilisation
i.
Foreign
Currency Non-Resident (Bank) [FCNR(B)] deposits
ii.
External
Commercial Borrowings (ECBs)
iii.
Overseas
Foreign Currency Borrowings (OFCBs)
4.
Special
Swap Facility:
i.
Mechanism
that allows eligible foreign currency deposits and overseas borrowings
to be swapped with the RBI.
ii.
Banks
mobilize foreign currency which they deposit (the dollars) with the RBI through
a currency swap.
iii.
The
RBI provides rupees to the banks at a concessional swap rate, reducing the
banks' hedging cost.
iv.
At
maturity, the transaction is reversed at the pre-agreed exchange rate. Easing
out exchange rate risks.
v.
This
makes it cheaper and more attractive for banks to raise foreign
currency from abroad.
Source:
THE
HINDU - https://www.thehindu.com/business/over-20-billion-mobilised-through-rbis-special-swap-facility/article71245998.ece