GIFT-IFSC banking units sanctioned $54.02 billion under the RBI’s FCNR(B) swap facility by August 31, with $52.82 billion disbursed. Banks now want IFSCA to exclude qualifying FCNR(B)-backed loans from sustainable lending calculations, but regulatory relief remains unconfirmed.
October 26, 2026
Banks operating at Gujarat International Finance-Tec City (GIFT City) are seeking relief from sustainable lending requirements after a sharp increase in foreign-currency funding through the Reserve Bank of India’s (RBI) special swap facility.
According to The Economic Times report published on October 25 and updated on October 26, banks have approached the International Financial Services Centres Authority (IFSCA) to exclude loans extended by international banking units (IBUs) against Foreign Currency Non-Resident (Bank), or FCNR(B), deposits from mandatory sustainable lending calculations.
The scale of the funding surge provides the context. Twenty GIFT-IFSC banking units sanctioned $54.02 billion under the RBI facility by August 31, 2026, of which approximately $52.82 billion had been disbursed, according to the Ministry of Finance.
The request raises a regulatory question: can banks accommodate a rapid expansion in funding while meeting sustainable finance obligations, particularly when eligible investment opportunities may be limited? Banks are seeking a carve-out, but IFSCA’s response remains unconfirmed.
GIFT City Funding Surge: The Latest Figures
| Indicator | Amount | Reference date |
|---|---|---|
| GIFT-IFSC sanctions under the swap facility | $54.02 billion | August 31 |
| GIFT-IFSC disbursements under the facility | $52.82 billion | August 31 |
| Total national inflows under the RBI facility, revised | $143.596 billion | August 31 |
| National FCNR(B) deposits, revised | $132.98 billion | August 31 |
Sources: Ministry of Finance and the RBI’s revised figures reported by The Economic Times.
NiftyTrader calculation: GIFT-IFSC sanctions rose from $28.60 billion on August 14 to $54.02 billion on August 31, an increase of approximately 88.9%.
One correction is important for readers. The RBI’s September 2 figures were provisional and placed total national inflows at $136.377 billion, including $127.226 billion through FCNR(B) deposits. The RBI subsequently revised the August 31 totals, with the updated figures reported on September 21. The revised national figures above are therefore preferable to the earlier provisional numbers.
The two sets of data measure different things: GIFT-IFSC banking units’ sanctions and disbursements versus foreign-currency inflows across the wider national scheme. They should not be treated as interchangeable measures of deposits or lending.
Uday Kotak Highlighted GIFT City’s Role
On September 3, Uday Kotak praised the role of GIFT-IFSC banking units, describing them as having funded about $52 billion against the $127 billion in FCNR(B) deposits raised under the RBI swap facility, according to ET Now’s report.
The $127 billion figure reflected the national deposit total available at that time. It was subsequently revised by the RBI to $132.98 billion.
The comments highlight GIFT City’s growing role in channelising foreign-currency resources through international banking units. However, the scale of the funding mobilisation does not, by itself, establish how much regulatory relief individual banks need.
Sustainable Lending Reaches $6.28 Billion in FY26
The potential tension becomes clearer when the funding surge is viewed alongside IFSCA’s own sustainable-lending data.
IFSCA’s updated September 2026 brochure reports that banks in GIFT-IFSC facilitated $6.28 billion in green, social, sustainable and sustainability-linked (GSS+) lending during FY26, compared with $3.39 billion in FY25.
| Financial year | Bank GSS+ lending |
|---|---|
| FY25 | $3.39 billion |
| FY26 | $6.28 billion |
NiftyTrader calculation: The reported amount increased by approximately 85.3% year-on-year, using the rounded figures in IFSCA’s brochure.
The comparison provides useful scale but needs qualification. The $6.28 billion figure represents annual sustainable lending, while $52.82 billion represents disbursements under the RBI’s special swap facility over the period ending August 31. These are different measures, not equivalent pools of loans, and the figures do not prove that banks face a specific compliance shortfall.
Nevertheless, the rapid expansion of FCNR(B)-linked activity alongside the growth in sustainable lending helps explain why the treatment of these loans has become a regulatory issue.
Source: IFSCA’s September 2026 Sustainable Finance brochure.
What Does IFSCA’s 5% Sustainable Lending Rule Say?
There is an important distinction between the published framework and a later regulatory proposal.
IFSCA’s April 2022 guidance framework describes a target under which 5% of incremental lending by banks and finance companies is directed towards sustainable projects. Its updated September 2026 brochure continues to describe the requirement in those terms.
IFSCA also published a consultation paper in January 2026 proposing a broader sustainable finance framework covering sustainable deposits, lending and investments. The draft proposed a revised target based on aggregate loans disbursed and investments made in debt securities and funds during the preceding financial year.
However, the consultation paper is not, by itself, evidence that the proposed formula became the operative rule. IFSCA’s public Sustainable Finance page continues to list the April 2022 lending framework. A final circular adopting the January 2026 proposal could not be located in the official listings reviewed for this article.
That distinction matters because the formula determines how the required target is calculated. IFSCA should clarify both the currently applicable calculation and the treatment of FCNR(B)-backed loans before the precise scope of any requested exemption is described as settled.
RBI Has Granted Separate Relief Under Other Rules
Banks have a regulatory precedent for seeking targeted relief, although the existing RBI exemptions apply to different requirements.
In August 2026, the RBI amended its priority-sector lending directions to allow qualifying advances against fresh FCNR(B) deposits with tenors of three to five years, mobilised under the specified swap scheme, to be excluded from adjusted net bank credit calculations.
Separate RBI amendments also provided specified exemptions for qualifying fresh FCNR(B) deposits under cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements.
These measures explain why banks may expect similar consideration from IFSCA. They do not automatically extend to sustainable lending calculations, which fall under a separate framework.
Source: RBI priority-sector lending amendment.
What Happens Next?
The key outstanding question is whether IFSCA will accept the requested carve-out and clarify the applicable calculation method.
If relief is granted, eligible FCNR(B)-linked loans could receive different treatment under the sustainable lending calculation, subject to the terms of the final decision. If relief is not granted, banks would continue to operate under the applicable framework.
The available reporting does not quantify the compliance shortfall of individual banks or establish the likely impact on earnings. Investors should therefore not treat the request as a confirmed share-price catalyst.
For broader domestic equity-flow context, readers can track NiftyTrader’s FII/DII data separately from the foreign-currency mobilisation figures discussed here.
Bottom Line
GIFT-IFSC banking units’ $54.02 billion in sanctions under the RBI’s FCNR(B) swap facility has brought sustainable lending calculations into focus as banks seek greater flexibility. IFSCA’s own data show that sustainable lending reached $6.28 billion in FY26, but the available figures do not establish a direct compliance shortfall.
The next development to watch is IFSCA’s response and clarification of the operative 5% calculation. Until the regulator confirms its position, the proposed exemption remains a request rather than an approved change.
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Disclaimer: This article is for informational purposes only and is not investment advice.
