RBI’s US Dollar–Rupee Swap Facility for PSU ECBs and Bank OFCBs: Complete Compliance Guide
The Reserve Bank of India, through circular RBI/2026-27/100 bearing reference FMOD.MAOG.No.S-57/01.06.016/2026-27 dated June 8, 2026, has announced a dedicated US Dollar–Rupee Forex Swap Facility for specific categories of External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs).
This facility is designed to support:
- Eligible Public Sector Undertakings (PSUs) raising ECBs, and
- Authorised Dealer Category-I banks raising OFCBs,
by providing an assured USD-INR swap arrangement with RBI at a pre-fixed premium, thereby simplifying forex risk management and liquidity planning.
1. Regulatory Background and Objective
1.1 Context of the circular
The swap window follows the announcement in the Governor’s Statement dated June 5, 2026, where RBI indicated its intent to facilitate access to foreign currency funding while providing a transparent and predictable hedging cost.
Through this facility, RBI aims to:
- Provide a stable framework for forex risk mitigation for PSU ECBs and bank OFCBs,
- Support external borrowing by systemically important entities under controlled conditions, and
- Ensure that such inflows are properly hedged and integrated into the domestic forex market without undue volatility.
1.2 Legal and regulatory framework
The swap facility operates under and is aligned with:
- Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 dated February 09, 2026, in respect of ECBs, and
- Master Direction on Risk Management and Interbank Dealings dated July 5, 2016 (specifically Paragraph 5 in Part C), in respect of OFCBs.
All ECBs and OFCBs that seek to utilise this swap arrangement must fully comply with the above regulatory prescriptions in addition to the specific conditions laid down in the June 8, 2026 circular.
2. Scope of the Swap Facility
2.1 Categories of eligible borrowings
RBI has restricted the facility to two broad borrowing routes:
External Commercial Borrowings (ECBs)
- Minimum average maturity: 3 years or more.
- Drawdown period: ECBs drawn on or after June 8, 2026 (date of the circular) and up to December 31, 2026.
- Eligible borrowers:
- PSUs where the majority ownership lies with the Central and/or State Government (excluding banks), or
- PSUs that are incorporated, established or registered under a Central or State Act and are controlled by the Central/State Government.
The facility is also available for the undrawn portion of existing ECBs, as on the date of the circular, subject to conditions explained later.
Overseas Foreign Currency Borrowings (OFCBs)
- Eligible only when raised by Authorised Dealer Category-I banks.
- Minimum maturity: 3 years.
2.2 Nature of forex swap
Although the original borrowing could be in any foreign currency, the swap facility with RBI is strictly:
- Denominated in US Dollars, and
- Settled against Indian Rupees.
Thus, any ECB or OFCB in another currency (for instance, Euro, Yen, etc.) can still be covered under this facility, but the effective hedge with RBI will always be in the USD-INR pair, using equivalent US Dollar terms based on prevailing rates.
2.3 Ineligible ECBs
The circular expressly excludes certain ECB categories from the scope of the swap window:
- ECBs with embedded options (such as call/put options embedded in the borrowing contracts), and
- ECBs raised for refinancing or repayment of existing ECBs.
Only genuine fresh capital-raising ECBs, or the undrawn portion of an existing eligible ECB, qualify.
Note: Assessees and banks must ensure that the ECB purpose clauses and structure do not fall into the excluded categories before attempting to use the swap facility.