THE RBI’s concessional swap window for Foreign Currency Non-Resident (Bank) deposits has helped propel India’s foreign exchange reserves to a record high of $729.33 billion as on August 21. The FCNR (B) window has been operational since June 8.The previous all-time high was $728.49 billion as on February 27, just a day before the US and Israel attacked Iran, kickstarting the West Asia conflict that resulted in sharply higher global energy prices following the closure of the Strait of Hormuz.Since almost 85 per cent of India’s crude oil needs are met through imports, the conflict and the resultant rise in prices had pushed up the country’s import bill, exerting further pressure on the rupee. The rupee was already under intense stress due to large foreign fund outflows from domestic financial markets.Also Read | RBI’s forex swap window draws $72.85 billion inflows till August 21According to data released by the RBI on Friday, forex reserves rose by $12.42 billion in the week ended August 21. Last week, the RBI had said that FCNR (B) deposits of $65.4 billion had come in as of August 21 since the window opened in June. At the end of May, the total amount of FCNR(B) deposits outstanding was $34.04 billion.Under this FCNR (B) scheme, the central bank bears the full exchange rate risk of the NRI bank deposits – money is deposited in the foreign currency and not in rupees. This cushion allowed banks to offer interest rates as high as 7.4 per cent. NRIs have also poured in money into these deposits by taking advantage of the leverage offered by banks, which lets them make returns of as much as 15 per cent, by borrowing money at lower interest rates and then depositing it at the high FCNR(B) deposit rates on offer.Building forex reserves is an important signal to foreign investors, who have been pulling money out of Indian stock markets in droves: $19 billion in 2025 and $24 billion in the first five months of 2026. This has led to the rupee tumbling sharply and nearly touching the 97-per-dollar mark in mid-May. It is currently down 8.1% from a year ago.Higher forex reserves are indicative of the RBI having greater ability to defend the rupee. A continuously weakening rupee makes it less attractive for foreign investors to put money in India as their returns take a hit once they convert their investment into their home country currency, such as the US dollar.Story continues below this adWith net Foreign Direct Investments (FDI) also weak on account of rising overseas investments of Indian companies and foreign investors taking back profits made on past investments, India’s capital flows situation has been further complicated by the rise of interest rates in developed economies.Higher interest rates in countries such as the US makes India a less attractive destination for global investors.To pull money, the government and the RBI announced a series of measures on June 5. This included the aforementioned concessional swap facility as well as the removal of capital gains and withholding taxes on foreign portfolio investors’ investments in government securities.While money has flowed in the last three months, the rupee has not appreciated as was the case in late 2013, when the RBI had first introduced a swap facility for FCNR(B) deposits.Story continues below this adOn Friday, the rupee ended at 95.39 per dollar, little change from its June 4 level of 95.79.Contrast this with 2013: from 67.6-per-dollar on September 3, 2014, the day before the incoming RBI Governor Raghuram Rajan announced the FCNR(B) swap window, the rupee rose 10.3% to 61.3-per-dollar in the first 40 days of the scheme.Such has been the success of the FCNR(B) scheme in particular – the Ministry of Finance said in a statement earlier this week that money had flowed in faster than expected – that the RBI on August 14 said the swap window would close on August 31, one month earlier than the initially-announced deadline of September 30.Meanwhile, the swap facilities for Overseas Foreign Currency Borrowings and External Commercial Borrowings will remain open till December 31, as announced originally.Story continues below this adAnnounced on June 5, the three concessional swap windows have seen $72.85 billion flow in from June 8 to August 21, with the FCNR(B) deposits doing much of the heavy lifting. While $4.86 billion has come in under the window for Overseas Foreign Currency Borrowings, $2.59 billion has come in as External Commercial Borrowings.In its statement on Monday, the finance ministry said the FCNR(B) swap window had “achieved its objective ahead of schedule”.