UPSC Prelims Practice Questions — Forex swap rakes in over $136 bn

Q1. With reference to the special USD-INR swap facility opened by the Reserve Bank of India in 2026 for FCNR(B) deposits, which one of the following is correct?

  • A. It was announced on 5 June 2026 and applied to eligible deposits mobilised from 8 June 2026
  • B. It was announced on 8 June 2026 and applied to eligible deposits mobilised from 17 June 2026
  • C. It was announced on 23 June 2026 and applied to eligible deposits mobilised from 1 July 2026
  • D. It was announced on 5 June 2026 and applied to eligible deposits mobilised from 21 August 2026

Q2. Under the Reserve Bank of India's 2026 swap facility for FCNR(B) deposits, the swap transaction is contracted between which parties, and what does it cover?

  • A. Between authorised dealer banks and the RBI, covering only the principal amount of the deposits
  • B. Between authorised dealer banks and the RBI, covering the principal as well as the interest component
  • C. Between the non-resident depositor and the RBI, covering only the principal amount of the deposit
  • D. Between authorised dealer banks and the Government of India, covering the principal and exchange-rate losses

Q3. Which one of the following correctly describes the change made in 2026 to the closing dates of the windows under RBI's special forex swap facility?

  • A. The FCNR(B) window's closure was advanced from 30 September to 31 August 2026, while the OFCB/ECB window continued up to 31 December 2026
  • B. The FCNR(B) window's closure was advanced from 31 December to 30 September 2026, while the OFCB/ECB window was advanced to 31 August 2026
  • C. The FCNR(B) window's closure was advanced from 30 September to 31 July 2026, and the OFCB/ECB window was closed on the same date
  • D. The FCNR(B) window's closure was extended from 31 August to 30 September 2026, while the OFCB/ECB window was extended to 31 March 2027

Q4. The regulatory relaxations that accompanied the 2026 FCNR(B) swap window were granted by which authority, and included which of the following measures?

  • A. The Reserve Bank of India — exclusion of positions arising from the swap facility from banks' net overnight open position (NOP-INR) limits
  • B. The Department of Financial Services, Ministry of Finance — exemption of these deposits from cash reserve ratio and statutory liquidity ratio requirements
  • C. The International Financial Services Centres Authority — permission to mobilise these deposits through IFSC banking units at GIFT City
  • D. The Reserve Bank of India — a sovereign guarantee to depositors against exchange-rate loss on maturity of the deposits

Q5. Consider the following statements comparing the Reserve Bank of India's 2013 FCNR(B) swap window with its 2026 special USD-INR swap facility: 1. The 2013 window allowed banks to swap their FCNR(B) dollars with the RBI at a fixed cost of 3.5 per cent per annum, whereas under the 2026 facility the RBI itself bore the hedging cost on eligible deposits. 2. Both windows required the eligible FCNR(B) deposits to have a minimum original tenor of three years. 3. The 2013 window mobilised a larger volume of FCNR(B) funds than the 2026 facility. Which of the statements given above is/are correct?

  1. The 2013 window allowed banks to swap their FCNR(B) dollars with the RBI at a fixed cost of 3.5 per cent per annum, whereas under the 2026 facility the RBI itself bore the hedging cost on eligible deposits.
  2. Both windows required the eligible FCNR(B) deposits to have a minimum original tenor of three years.
  3. The 2013 window mobilised a larger volume of FCNR(B) funds than the 2026 facility.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q6. In the Reserve Bank of India's 2013 FCNR(B) swap window, the figure of 3.5 per cent, compounded semi-annually for the tenor of the swap, denoted which one of the following?

  • A. The fixed cost at which banks could swap the FCNR(B) dollars they mobilised into rupees with the RBI
  • B. The ceiling interest rate that banks were permitted to offer non-resident depositors on such FCNR(B) deposits
  • C. The concessional rate at which the RBI lent rupees to banks against the security of these dollar deposits
  • D. The premium payable by the RBI to banks for delivering the dollars back to it at the maturity of the swap

Q7. Consider the following statements regarding the Reserve Bank of India's outstanding net short dollar position in the forward market during 2026: 1. It rose to a record level of about $136.77 billion at end-July 2026 from about $103.33 billion at end-June 2026. 2. Short positions of tenor over one year rose from about $64.21 billion to about $91.54 billion between end-June and end-July 2026. 3. Short positions of tenor less than one year rose from about $47.66 billion to about $91.54 billion over the same period. Which of the statements given above is/are correct?

  1. It rose to a record level of about $136.77 billion at end-July 2026 from about $103.33 billion at end-June 2026.
  2. Short positions of tenor over one year rose from about $64.21 billion to about $91.54 billion between end-June and end-July 2026.
  3. Short positions of tenor less than one year rose from about $47.66 billion to about $91.54 billion over the same period.
  • A. 1 only
  • B. 2 and 3 only
  • C. 1 and 2 only
  • D. 1, 2 and 3

Q8. Non-resident deposit accounts such as NRE, NRO and FCNR(B) are governed by a framework laid down by which authority, and are maintained with which entities?

  • A. The Reserve Bank of India under the Foreign Exchange Management Act, 1999, with authorised dealer banks in India
  • B. The Reserve Bank of India under the Banking Regulation Act, 1949, with scheduled commercial banks and deposit-taking NBFCs
  • C. The Department of Economic Affairs under the Foreign Exchange Management Act, 1999, with authorised dealer banks in India
  • D. The Securities and Exchange Board of India under the Foreign Contribution (Regulation) Act, 2010, with custodian banks in India