Borrowing to repay.

"Foreign currency deposits from non-resident Indians (NRIs) have staged a sharp turnaround" "Since the implementation of the new RBI Swap Facility, FCNR(B) flows have totaled $17 billion in roughly 40 days, from June 8 to July 17, 2026." "As against $7,076 million of inflows in 2024-25, the FCNR(B) flows dipped to $946 million in 2025-26, a sharp fall of 87%." FE. May be a great start, but "HDFC Bank MD & CEO Sashidhar Jagdishan said potential inflows under the scheme may be lower than initially expected because tax rules make the 'borrowing to invest' option unattractive for many overseas Indians outside West Asia and Singapore." And "this could reduce the initial estimate of $60-80 billion in potential inflows." TOI. "The Reserve Bank of India (RBI) has likely used part of the initial inflows from its foreign -currency deposit drive to unwind a portion of its massive foreign exchange forward book, economists said." "The RBI's net short dollar forward book stood at a record $106.6 billion as of May 31, reflecting its heavy use of forwards to cushion the rupee," and "Of this, nearly $29 billion was concentrated in near-tenor contracts maturing within three months." Reuters. Which means that the RBI has converted its short term borrowing to longer term, but probably at much higher interest rates. "Assume that an NRI takes a loan of 162 million yen loan at, say, 4% per annum," converts it to $1 million, and then invests it in an FCNR(B) account at around 6.5% interest for 3 or 5 years. The RBI covers the hedging cost of around 3% and swaps the dollars for rupees to inject liquidity into the system to bring down borrowing costs, wrote Madan Sabnavis. The RBI will have to pay from its foreign exchange reserves when these bonds mature. Despite the influx of around $20 billion, "The rupee has lost nearly 2% this month for the weakest performance among Asian peers," and hence, "The central bank's limited and intermittent intervention has surprised traders who expected stronger support after Governor Sanjay Malhotra said it would do 'whatever is required' to ensure orderly currency moves." "Internally, officials are divided over how aggressively the central bank should intervene to support the rupee, said three sources." Reuters. RBI's confusion is because of the flare up of the conflict between Iran and the US. "Daily vessel transits of the Strait of Hormuz were steady at three for each of the past three days, according to preliminary ship tracking data, amid continuing shipping risks in the Middle East as oil prices surged back to $100 a barrel." Reuters. The cost of India's basket of crude fell from $114.48 per barrel in April 2026 to $79.1 this month. ppac.gov.in. Brent crude is selling at $96.78 per barrel this morning. oilprice.com. The RBI must be unsure about how long the conflict will last and how high oil prices will climb, which will determine the drain on its forex reserves. Veteran investor Shankar Sharma said that the FCNR(B) scheme "does not address India's external-sector challenges and will effectively finance foreign investors' exits from Indian equities." MC. What is worrying is that the RBI is also monetizing the government's fiscal deficit which is absolutely not its responsibility. The RBI transferred a record Rs 2.78 trillion to the government as dividend from its surplus (ET) and has also bought government bonds (including treasure bills) in open market operations (OMO) to a total of Rs 21.34 trillion (wrote Sabanvis). The RBI is collecting both foreign and domestic debt. Will it pay back by printing rupees and selling gold? That'll be RIP. For the rupee.