Discuss the role of RBI's swap facilities (FCNR(B), ECB, OFCB) in managing external sector vulnerabilities. How does the 2026 revival compare with the 2013 scheme?

A swap facility lets banks exchange foreign-currency funds raised abroad with the RBI at pre-set terms, converting private inflows into central bank reserves. First used during the 2013 "taper tantrum" and revived on June 8, 2026 amid rupee weakness [3], it has become the RBI's standard instrument for absorbing external shocks without depleting reserves.

Role in managing external sector vulnerabilities

• Reserve accretion without market intervention: instead of selling dollars in the spot market, the RBI buys them from banks, so the rupee is defended while reserves rise. The 2026 window drew $72.85 billion by August 21, 2026 [3].
• Diversified, non-debt-volatile inflows: eligibility covers FCNR(B) deposits, ECBs and OFCBs, with ECBs required to have average maturity of three years and above [2], substituting stable medium-term money for footloose portfolio capital.
• Risk transfer to the central bank: banks get a plain buy/sell swap on the principal, removing currency risk that would otherwise deter dollar mobilisation [2].
• Signalling: a pre-announced window steadies expectations, breaking depreciation–outflow spirals.

2026 revival compared with 2013

• Continuity in design: both offer concessional principal-only swaps on fresh three-year-plus foreign-currency money; 2013 fixed the cost at 3.5% compounded semi-annually [1].
• Wider coverage: 2013 centred on FCNR(B) dollar funds [1]; 2026 formally spans FCNR(B), ECBs and OFCBs, with swaps of up to five years [2].
• Greater and faster mobilisation: FCNR(B) alone contributed $65.4 billion, against $4.86 billion (OFCB) and $2.59 billion (ECB) [3] — uptake strong enough that the FCNR(B) deadline was advanced to August 31, 2026, while ECB/OFCB stays open till December 31, 2026 [3].
• Context: 2013 was crisis management; 2026 is pre-emptive buffer-building from a stronger reserve base.

The facility shows how a targeted, time-bound instrument can convert diaspora savings and corporate borrowings into macro-financial resilience. Going forward, such windows should complement — not substitute for — durable current account correction through export competitiveness, ensuring external stability rests on earnings rather than episodic inflows.