FCNR(B) deposits: Who bears the currency risk? | Explained
The Reserve Bank of India’s foreign currency non‑resident (FCNR) bank deposit scheme includes a swap that protects banks from exchange‑rate loss on the principal amount. However, the banks must still cover the interest paid in dollars, so they remain vulnerable to a depreciation of the rupee when servicing those interest obligations. The arrangement shifts part of the currency risk away from banks.