The Economic Research Department (ERD) of State Bank of India has sharply increased its forecast for foreign currency inflows. They now expect between $80 billion and $85 billion to flow into India. This includes money from FCNR(B) deposits (Foreign Currency Non-Resident deposits where the bank bears the exchange risk), External Commercial Borrowings (loans taken by Indian companies from foreign lenders), and Overseas Foreign Currency Borrowings. The previous estimate was much lower at $55-65 billion.

A major reason for this jump is the special RBI facility for FCNR(B) deposits. This scheme covers the full hedging cost (protection against currency fluctuations) for banks until September 2026. Because of this, SBI expects FCNR(B) inflows alone to reach $65-70 billion, up from an earlier guess of $40-45 billion. In fact, in just 45 days, these deposits have already crossed the levels seen during the 2013 currency crisis.

Soumya Kanti Ghosh, the Group Chief Economic Advisor at SBI, noted that large Public Sector Banks are leading this drive. These banks are using their global networks and trust to bring in NRI funds. High interest rates are also encouraging people to park their dollars in these accounts rather than moving them elsewhere. Many existing deposits maturing in late 2026 are expected to be renewed under these attractive new terms.

However, there is a confusing trend in the market. Usually, when a lot of foreign money enters a country, the local currency gets stronger. But the Indian Rupee is still weakening. The ERD report mentions that the Rupee has moved '360 degrees.' It used to act as a shock absorber for the economy, but now it seems vulnerable to global pressures despite the high dollar inflows.

The report also looked at how the Reserve Bank of India (RBI) manages this. It found that the RBI currently spends about $14 million a day to control Rupee volatility (sharp ups and downs). While this helps a little, it is not enough to stop the Rupee from losing value. In comparison, back in 1997-98, the RBI spent $55 million a day to protect the Rupee, even though India had much smaller foreign exchange reserves back then.

For Indian bank officers, this means a busy season for NRI banking and foreign exchange departments. While the influx of deposits provides great liquidity (ready cash), the continued depreciation of the Rupee remains a concern for trade and inflation. If the Rupee keeps falling despite these record inflows, it could lead to a 'self-fulfilling prophecy' where markets expect it to drop further, causing more panic selling.

Going forward, bankers should watch if the RBI increases its intervention in the currency market. The current window for these special FCNR(B) flows closes on September 30, 2026. Until then, the focus stays on balancing high-cost foreign deposits with the need to keep the Rupee stable against global shocks like the ongoing tension in West Asia.