Do NRI deposit schemes offer a sustainable way to bolster reserves? Evaluate.

NRI deposit schemes — FCNR(B) and NRE accounts, often sweetened by an RBI swap window — pull in dollars quickly during external stress. India's reserves touched a record $766 billion on 18 September 2026, credited largely to a special NRI deposit scheme [2]. They stabilise reserves effectively, but cannot sustainably build them.

Merits: a fast and effective stabiliser

• Speed and scale: a swap window mobilises dollars faster than exports or FDI; in 2013 the RBI covered fresh FCNR(B) deposits made after 6 September at a concessional 3.5% swap cost, drawing inflows within months [3].
• Shock absorption: reserves now cover 11.2 months of goods imports [2] — vital when nearly 87% of crude is imported, mostly from the tension-prone Middle East [6].
• Rupee and price stability: the cushion limits imported inflation as West Asian escalation lifts crude [1], a pressure the August 2026 MPC minutes flagged [4].
• Relatively stickier than portfolio flows: the current facility requires a minimum original tenor of three years [7].

Limits on sustainability

• Liability-creating inflow: a deposit must be repaid. Reserves rise without any improvement in export earnings or the current account.
• Redemption cliff: the uniform three-year minimum tenor [3][7] bunches repayments into one window; if it coincides with another shock, the cushion thins exactly when needed.
• Fiscal and banking cost: subsidised swap rates transfer exchange-rate risk to the RBI and banks [3].
• Monetary distortion: the September 2026 bulletin records system liquidity surplus surging on FCNR(B) flows [1], complicating liquidity management.
• Dollars cannot be refined: import cover is a payment buffer; emergency crude is only about 9.5 days under SPR Phase I [5].

NRI schemes are therefore a legitimate emergency instrument, not a durable reserve base — borrowed strength, bought time. Sustainable accumulation must rest on export competitiveness, FDI and lower oil intensity, supported by transparent disclosure of deposit maturity profiles and completion of SPR Phase II, which adds roughly 12 days of cover [5].