Rupee gains from FCNR (B) boost reverse in September amid higher crude oil prices: RBI bulletin
The Indian rupee’s gains earlier in September, supported by FCNR (B) deposit flows under the Reserve Bank of India’s concessional swap window, were reversed in the latter part of the month as crude oil prices rose, according to an article published in the central bank’s bulletin.
Crude oil prices have remained a key focus for financial markets since late February, when the US and Israel launched joint strikes on Iran.
The attacks triggered the ongoing conflict in West Asia and disrupted shipping through the Strait of Hormuz, a key transit route that handles around a quarter of global seaborne oil trade, further affecting oil supplies.
Why are Brent crude prices rising again?
Both Tehran and Washington leaders exchanged barbs at the UN General Assembly this week, sending Brent crude prices back above $100 a barrel.
All week, crude prices have been buffeted by mixed signals on the outlook for peace, indications of a pick-up in Middle East flows and speculation that the US may ban diesel exports. For the year, Brent remains more than 70% higher, adding to inflationary pressures, according to a Bloomberg report.
Rupee remains under pressure
The central bank said that inflows through schemes aimed at bolstering the rupee and bringing foreign inflows into India topped $143.5 billion as of 18 September, with FCNR(B) deposits accounting for the bulk at nearly $133 billion.
The FCNR (B) scheme was closed one month ahead of its original September 30 deadline. RBI’s reply to the deadline change was an “encouraging response” from the target participants.
So far in September, the Indian rupee has depreciated 0.7% . The currency is down nearly 7% against the US dollar in 2026 and was trading at ₹95.82 per US dollar at the time this article was published.
“West Asia tensions and high crude oil prices caused the Indian rupee (INR) to depreciate for most of August. Strong FCNR(B) deposits led to brief recoveries in early September, but these gains reversed in the later part of the month on account of higher crude oil prices,” said RBI Deputy Governor Poonam Gupta in the bulletin published on Friday.
Why RBI DG expects rupee pressure to ease
The RBI’s top executive said the special capital flow measures implemented in June have helped India record a meaningful balance of payments surplus this year. “This reflects India’s unique ability to attract large inflows at a very small country premium,” she added.
Gupta also noted that the rupee’s depreciation in the past year and a half could be temporary, describing it as a possible “overcorrection.”
“If anything, there seems to be a fair case for the rupee to not just stabilize but perhaps even appreciate from the current levels, as was being anticipated by the market analysts when the capital flow measures were first announced,” she said.
The RBI bulletin clearly states that all articles are based on the views of their authors and does not represent the central bank’s perspective.
