Mumbai, Sep 24 Reserve Bank Deputy Governor Rohit Jain on Thursday said banks are expected to deploy additional liquidity from foreign-currency non-resident deposits over the next few months, as credit demand is likely to be strong during the festive season.
Under the special Foreign Currency Non-Resident (FCNR-B) deposit scheme, banks have mobilised USD 133 billion. The scheme closed on August 31, one month ahead of the earlier schedule following a robust response from the Indian diaspora.
Talking to reporters on the sidelines of the 13th SBI Banking & Economics Conclave here, Jain said the RBI has held meetings with banks to discuss their liquidity position following the FCNR(B) inflows.
“Banks expected to deploy FCNR(B) liquidity over the next few months, helped by the upcoming festive season and strong credit demand,” he said, adding that the RBI is not directing banks to any particular sector to deploy the mobilised funds.
The deputy governor further said banks will have full discretion on deployment of FCNR(B) liquidity, based on their credit pipeline, proposals and liquidity outlook.
Banks’ asset-liability position will determine how they use the additional liquidity, he added.
Jain further said credit demand is broad-based, with all sectors and segments growing reasonably well, and the central bank does not see any particular sector requiring caution at present.
“Banks are themselves cautious on credit and underwriting, and the RBI expects healthy credit standards to continue,” the deputy governor said.
The RBI’s special USD-INR forex swap facility for FCNR (B) deposits, Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECBs) was launched on June 8, 2026.
The scheme was closed on August 31 for FCNR(B) deposits. However, the ECB and OFCB window will be open until December 31, 2026.
According to the RBI’s latest data reported by authorised dealer banks till September 18 on FCNR(B), ECBs and OFCBs, the total inflows stood at USD 143.596 billion.
In a panel discussion, Jain said India has become the fifth-largest holder of foreign exchange reserves globally.
He said forex reserves are managed with three principal considerations: safety, liquidity and return.
The deputy governor informed that the reserves are diversified across geographies, currencies and asset classes, with internal and external asset managers.
The RBI’s objective is to ensure external resilience and maintain confidence among foreign investors and counterparties, he added.
Jain also noted that the state government securities market remains fragmented, with weak secondary-market liquidity, and the RBI is encouraging states to undertake more reissuances to improve secondary-market activity.
The central bank is also pushing states towards a benchmark issuance strategy, similar to the Centre.
The RBI is positive about tokenisation and sees significant potential for the technology in the financial sector, he pointed out.
Tokenisation can enable digital ownership records, automated settlements and operational efficiencies.
The RBI, however, wants adequate safeguards and guardrails before wider adoption, Jain added.
The scale of the response prompted the RBI to close the FCNR(B) window a month earlier than originally planned. The facility was initially scheduled to remain open until September 30, but was brought forward to August 31 after the central bank said its objective had been achieved ahead of schedule.
FCNR(B) deposits are fixed-term deposits held in foreign currencies, with the principal and interest repaid in the same currency, shielding depositors from direct rupee exchange-rate risk. The arrangement allows non-resident Indians to place foreign-currency funds with Indian banks without taking direct rupee-currency risk.
Earlier, addressing the gathering at the conclave, Jain said that over the last two decades, technology has transformed Indian banking.
It has expanded access, reduced transaction costs, enabled round-the-clock services and allowed financial institutions to serve customers at a scale that would have been difficult to achieve through traditional channels alone, he noted.
The deputy governor said that as technology transforms banking, the risk landscape is evolving just as rapidly.
“We must, therefore, recognise technology risk, and more specifically technology architecture risk, as a first-order enterprise risk, comparable in importance to traditional balance-sheet risks.
“It can no longer be viewed as a back-office or purely technical concern, to be managed exclusively by the IT department,” he said.
“The reason is straightforward. Technology is now embedded in almost every critical banking function, from core banking and payments to customer onboarding, credit assessment, fraud monitoring and regulatory reporting.
“A failure in the underlying technology architecture can therefore disrupt not just a system but the delivery itself of essential financial services,” Jain added.
He further said cybersecurity, too, can no longer be understood simply as the protection of an institution’s external perimeter.
The threat landscape is becoming more complex and increasingly combines technological vulnerabilities with human behaviour, he said, adding that ransomware can affect the availability of critical systems and disrupt service continuity. Compromised credentials can provide access to sensitive applications.
“Ultimately, sound technology governance is not about attempting to eliminate every possibility of failure. It is about developing the institutional capacity to identify vulnerabilities early, make informed decisions, limit the impact of disruptions, protect customers and recover critical services,” Jain said.
This requires a combination of strong oversight, capable personnel, resilient architecture, effective controls and a culture in which technology risk is recognised as a shared responsibility, he said.
In the AI era, governance must provide the discipline that enables innovation to be adopted with confidence, while ensuring that the resilience and trustworthiness of the financial system remain paramount, the deputy governor added.
(PTI News)
