RBI Expands Loan Facilities for Non-Resident Account Holders
On June 23, 2026, the Reserve Bank of India (RBI) announced new measures allowing Indian banks, including their overseas branches, to offer loans to non-resident account holders. This includes the ability to issue Standby Letters of Credit (SBLC) to foreign lenders against Foreign Currency Non-Resident (Bank) deposits.
This decision adds to existing banking provisions that enable banks to provide both secured and unsecured loans and issue guarantees under standard banking practices.
In a detailed FAQ, the RBI clarified that banks can lend to FCNR(B) account holders and can place a legal claim, known as a lien, on these deposits until any debt is settled.
Previously, on June 5, 2026, the RBI had introduced a special facility that allows banks to gather fresh FCNR(B) deposits for terms ranging from three to five years until September 2026. The banks can also swap these deposits with the RBI at a lower rate, which will cover the cost of hedging. This new structure is expected to attract around $50 billion in foreign investments in India, as banks are now offering more competitive interest rates.
Forex Swap Arrangements
The RBI will provide a foreign exchange swap for the deposited amounts. This swap will only cover the principal amount and not any interest earned. Banks can conduct swaps for terms shorter than three years, provided they have gathered fresh FCNR(B) deposits with an original term of at least three years.
Interest rates for these deposits, even if differing, will need to align with RBI guidelines issued in 2025.
Banks can still accept standard FCNR(B) deposits for terms of three to five years without using the swap facility. However, these will require separate record-keeping.
Finally, External Commercial Borrowings (ECBs) can be arranged for varying durations as per regulations issued in 2026. Only ECBs with an average maturity of three years or more will qualify for this new facility, with swaps aligned with repayment schedules or maturities, capped at a maximum of five years.
