State Bank of India’s Economic Research Department (ERD) expects a much higher accretion to FCNR (B) deposits under the RBI’s special facility that covers full hedging cost for banks mobilising them by September-end 2026. It has revised its early June 2026 estimate from $40-45 billion to $65-70 billion. However, it noted that the rupee has moved 360 degrees, from being a shock absorber to not being a shock absorber.Overall, SBI’s ERD expects $80-$85 billion to flow into the country, if one includes the flows under OFCB (Overseas Foreign Currency Borrowing) and ECB (External Commercial Borrowing), against its earlier estimate to $55-65 billion.While FCNR (B) deposits may have already crossed the 2013 level of $26 billion in just 45 days, continued rupee depreciation is a matter of concern, with RBI intervention in the foreign exchange (Fx) market being somehow sporadic and not full throttled ever since the disturbances in West Asia broke out, the ERD said.“The RBI figure of $20 billion inflows till 17 July came as a positive reprieve, chiefly with a smart FCNR (B) corpus of $17.4 billion. We now estimate that FCNR (B) since then has already crossed 2013 level.“However, the broader markets are still wrestling with (a) the co-relation of these flows with first FCA (foreign currency assets) position and (b) why the exchange rate has continued to weaken even after such strong capital inflows,” said Soumya Kanti Ghosh, Group Chief Economic Advisor (GCEA), SBI.He assessed that Public Sector Banks, front led by larger Banks, are apparently anchoring the FCNR (B) mobilisation drive, ensuring incremental flows by leveraging not only the deposits, but also the trust built with materially significant clientele (credit worthiness and risk profile duly factored) spread across various geographies and remaining tacitly agile by shifting their strategy to an optimally blended Onshore-Offshore gameplan.“We believe that significant majority of existing FCNR deposits which are going to mature in August/September 2026 will be renewed under the new scheme (gravitated by higher interest rates) and will boost the FCNR (B) inflows, wherein total amount mobilized so far in 45 days would have easily crossed the total amount mobilized in 2013 in 3 months!,” Ghosh said.Referring to the puzzle of FCNR (B) accretion not being reflected in concomitant growth in FCA of RBI, SBI’s GCEA emphasised that it is important to explain this link as otherwise there could be conjectures and speculation dotting the landscape.RBI intervention in Fx market sporadicGhosh observed that RBI intervention in the foreign exchange market has been somehow sporadic and not full throttled ever since the disturbances in West Asia broke out.Employing a Censored Tobit model to estimate how RBI’s daily foreign exchange intervention reaction function has influenced the direction of rupee value and impacted volatility, SBI ERD’s results indicate that RBI on an average intervenes $14 million/day to thwart rupee volatility which is statistically significant.However, the volatility coefficient though positive, but is statistically insignificant, suggesting that such quantum of RBI intervention strategy was unable to arrest the volatility and prevent rupee from further depreciation. The ERD noted that this amount given the stock of $676 billion (of forex reserves) is not significant enough to curb the rupee depreciation.In contrast, the findings of Ghosh (2001) using a similar model indicate that in 1997-98 during the time of former RBI Governor Bimal Jalan, RBI intervention on an average was much higher at $55 million and was also able to stop rupee from further depreciation, even as overall for-eign exchange reserves was of the order of only $29 billion or so.The ERD opined that the volatility coefficient was also statistically significant during that time indicating that the volatility also had declined then because of forceful intervention by RBI.Ghosh said, “Rupee has moved 360 degrees; from being a shock absorber to not being a shock absorber. It is, therefore, important to not let the rupee travel 360 degrees again but ensure its implied resilience to checkmate exogenous shocks without losing competitiveness.“This is important given frictions in trade and supply/value chains, geopolitical risks and skewed capital flows. Allowing the rupee to depreciate even now against such healthy capital inflows may result in an endless fall driven by self fulfilling prophecy after the window for FCNR (B) closes on 30’Sep 2026.”Published on July 27, 2026