UPSC Prelims Practice Questions — RBI ups FCNR(B) inflows to $133 bn

Q1. With reference to the Foreign Currency Non-Resident (Bank) — FCNR(B) — deposit scheme as regulated by the Reserve Bank of India, consider the following statements: 1. Such accounts may be opened only in the form of term deposits, and not as savings or current accounts. 2. Outside any special swap window, the permissible maturity of such a deposit ranges from one year to three years. 3. Interest on the balances is payable only at the time of maturity, and not at half-yearly or annual rests. 4. On maturity the balance must compulsorily be remitted abroad, and cannot be converted into a resident rupee deposit account. Which of the above is/are correctly identified?

  1. Such accounts may be opened only in the form of term deposits, and not as savings or current accounts.
  2. Outside any special swap window, the permissible maturity of such a deposit ranges from one year to three years.
  3. Interest on the balances is payable only at the time of maturity, and not at half-yearly or annual rests.
  4. On maturity the balance must compulsorily be remitted abroad, and cannot be converted into a resident rupee deposit account.
  • A. 1 and 3 only
  • B. 2, 3 and 4
  • C. 1 and 2 only
  • D. 1, 2 and 4

Q2. Acceptance of deposits in foreign currency from persons resident outside India by authorised dealer banks in India is regulated primarily under which one of the following legal instruments?

  • A. The Banking Regulation Act, 1949, read with the Deposit Insurance and Credit Guarantee Corporation Act, 1961
  • B. Section 45ZB of the Reserve Bank of India Act, 1934, read with the Monetary Policy Framework Agreement
  • C. The Foreign Exchange Management (Deposit) Regulations framed under the Foreign Exchange Management Act, 1999
  • D. The Foreign Contribution (Regulation) Act, 2010, read with rules notified by the Ministry of Home Affairs

Q3. The June 2026 circular operationalising the concessional swap facility for fresh FCNR(B) deposits was issued by which one of the following wings of the Reserve Bank of India?

  • A. Department of Regulation, which frames prudential norms for scheduled commercial banks
  • B. Foreign Exchange Department, which administers the Foreign Exchange Management Act, 1999
  • C. Department of Economic and Policy Research, which compiles and publishes macroeconomic statistics
  • D. Financial Markets Operations Department, which conducts the Reserve Bank's market operations

Q4. Consider the following conditions stipulated in the Reserve Bank of India's circular of June 8, 2026 on the swap facility for FCNR(B) deposits: 1. Only fresh FCNR(B) deposits, including renewed deposits, mobilised under the circular are eligible. 2. The underlying deposit must have a minimum tenor of three years and a maximum tenor of five years. 3. Deposits may be accepted in any freely convertible currency, but the swap with the Reserve Bank is undertaken only in US dollars. 4. The facility is available only to public sector banks authorised to deal in foreign exchange. Which of the above is/are correctly identified?

  1. Only fresh FCNR(B) deposits, including renewed deposits, mobilised under the circular are eligible.
  2. The underlying deposit must have a minimum tenor of three years and a maximum tenor of five years.
  3. Deposits may be accepted in any freely convertible currency, but the swap with the Reserve Bank is undertaken only in US dollars.
  4. The facility is available only to public sector banks authorised to deal in foreign exchange.
  • A. 1 and 3 only
  • B. 1, 2 and 3 only
  • C. 2 and 4 only
  • D. 1, 2, 3 and 4

Q5. Consider the following statements about the inflows mobilised under the Reserve Bank of India's 2026 concessional forex swap window: 1. FCNR(B) deposits accounted for the overwhelming bulk of the total inflows mobilised through the window. 2. The Reserve Bank's provisional data released in early September 2026 placed FCNR(B) inflows at about 127 billion US dollars. 3. As on August 31, 2026, Overseas Foreign Currency Borrowings had mobilised more than External Commercial Borrowings. 4. The window for Overseas Foreign Currency Borrowings and External Commercial Borrowings closed on the same date as that for FCNR(B) deposits. Which of the above is/are correctly identified?

  1. FCNR(B) deposits accounted for the overwhelming bulk of the total inflows mobilised through the window.
  2. The Reserve Bank's provisional data released in early September 2026 placed FCNR(B) inflows at about 127 billion US dollars.
  3. As on August 31, 2026, Overseas Foreign Currency Borrowings had mobilised more than External Commercial Borrowings.
  4. The window for Overseas Foreign Currency Borrowings and External Commercial Borrowings closed on the same date as that for FCNR(B) deposits.
  • A. 1 and 2 only
  • B. 2, 3 and 4 only
  • C. 1, 2 and 3 only
  • D. 1 and 4 only

Q6. As per the Reserve Bank of India's provisional position as on August 31, 2026, how many of the three channels under the concessional swap window had each mobilised more than 5 billion US dollars?

  • A. None of the three channels
  • B. Only one of the three channels
  • C. Two of the three channels
  • D. All three of the channels

Q7. Consider the following statements regarding the rationale and effects of the Reserve Bank of India's 2026 concessional forex swap window: 1. It gave banks a stable medium-term foreign currency funding source at a time when credit growth had been outpacing deposit growth. 2. Since the swap was undertaken at par, the exchange rate risk on the principal of eligible deposits shifted from the depositor bank to the Reserve Bank. 3. The facility eliminated any need for the Reserve Bank to intervene in the spot or forward foreign exchange markets. 4. Inflows under the window are a permanent addition to India's foreign exchange reserves, since such deposits are not a repayable external liability. Which of the above is/are correctly identified?

  1. It gave banks a stable medium-term foreign currency funding source at a time when credit growth had been outpacing deposit growth.
  2. Since the swap was undertaken at par, the exchange rate risk on the principal of eligible deposits shifted from the depositor bank to the Reserve Bank.
  3. The facility eliminated any need for the Reserve Bank to intervene in the spot or forward foreign exchange markets.
  4. Inflows under the window are a permanent addition to India's foreign exchange reserves, since such deposits are not a repayable external liability.
  • A. 1, 3 and 4
  • B. 2 and 3 only
  • C. 1, 2 and 4
  • D. 1 and 2 only

Q8. The power to impose reasonable restrictions on capital account transactions, under which India's regime for non-resident foreign currency deposits and external commercial borrowings operates, is conferred by which one of the following provisions?

  • A. Section 35A of the Banking Regulation Act, 1949
  • B. Section 6 of the Foreign Exchange Management Act, 1999
  • C. Section 42 of the Reserve Bank of India Act, 1934
  • D. Section 11 of the Securities and Exchange Board of India Act, 1992

Q9. In the context of the September 2026 rating agency assessment that the large foreign currency deposit mobilisation was a 'shot in the arm' for Indian banks, the credit-deposit ratio of a bank means which one of the following?

  • A. The ratio of the increase in a bank's advances to the increase in its deposits over a financial year
  • B. The ratio of a bank's low-cost current and savings account balances to its total deposits
  • C. The ratio of a bank's total outstanding advances to its total deposits
  • D. The ratio of a bank's outstanding credit to its total risk-weighted assets

Q10. According to the September 2026 assessment by S&P Global Ratings, the large foreign currency deposit mobilisation was significant for Indian banks primarily because it addressed which one of the following?

  • A. The shortfall in Common Equity Tier-1 capital at several large public sector banks relative to Basel III norms
  • B. The rise in gross non-performing assets originating in the unsecured retail and microfinance loan segments
  • C. The persistent gap between bank deposit rates and the administered rates on small savings schemes set by the Centre
  • D. The funding squeeze created by credit growth outpacing deposit growth over the preceding four years

Q11. The repo rate, the Reserve Bank of India's conventional policy instrument, is determined by a committee constituted under which one of the following provisions?

  • A. Section 21 of the Banking Regulation Act, 1949
  • B. Section 45ZB of the Reserve Bank of India Act, 1934
  • C. Section 47 of the Foreign Exchange Management Act, 1999
  • D. Section 7 of the Fiscal Responsibility and Budget Management Act, 2003

Q12. Consider the following statements comparing the Reserve Bank of India's 2013 swap window for FCNR(B) dollar funds with the concessional swap facility of 2026: 1. In 2013 the swap was offered to banks at a fixed cost of 3.5 per cent per annum compounded semi-annually, whereas in 2026 the swap was undertaken at par. 2. Both windows required the underlying fresh FCNR(B) deposits to carry a minimum maturity of three years and a lock-in period of one year. 3. In both windows the Reserve Bank's swap leg was in US dollars, and in 2026 only deposits denominated in US dollars were eligible for the facility. Which of the statements given above is/are correct?

  1. In 2013 the swap was offered to banks at a fixed cost of 3.5 per cent per annum compounded semi-annually, whereas in 2026 the swap was undertaken at par.
  2. Both windows required the underlying fresh FCNR(B) deposits to carry a minimum maturity of three years and a lock-in period of one year.
  3. In both windows the Reserve Bank's swap leg was in US dollars, and in 2026 only deposits denominated in US dollars were eligible for the facility.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3