In a bold push to attract global Indian capital, Indian banks are spotlighting their FCNR(B) deposit scheme with a headline-grabbing promise: Dollar returns of up to 14 per cent annualised and paired with a leverage facility. Aimed squarely at high-net-worth non-resident Indians, the offering blends fixed dollar deposits with access to loans against those deposits, amplifying potential gains.
Indian banks with strong overseas presence such as State Bank of India, Bank of Baroda, Bank of India, ICICI Bank, Axis Bank and HDFC Bank are better placed to attract Foreign Currency Non-Resident (Bank) deposits under the RBI’s limited period swap window.
leverage advantage
A large bank has circulated a message to its NRI clients offering a scheme that requires a minimum investment of $1 million, locked for three-five years. Base deposit rates range between 5.50 per cent and 6.00 per cent, but the real draw lies in the bank’s leverage option, allowing investors to borrow up to nine times their deposit. By reinvesting borrowed funds, the bank projects significantly higher annualised yields even after accounting for loan costs.
Positioned as a dollar-denominated instrument, the product eliminates exchange rate risk on maturity while ensuring full repatriation of principal and interest, key concerns for overseas investors.
The bank’s overseas branches as well its overseas subsidiaries’ branches can give a loan of $9 million on a fresh deposit of $1 million. The proceeds of the loan can be placed as a fresh FCNR (B) deposit at a higher interest rate that banks are currently offering for a limited period. Effectively, the bank now has a $10 million FCNR (B) deposit on which it has given a $9 million loan.
high stakes play
The bank is clearly pitching a sophisticated, high-stakes play for NRIs seeking to maximise returns in a stable currency framework.
Banks’ overseas branches as well their overseas subsidiaries branches can extend loans to NRIs based on the strength of their existing/ new FCNR (B) deposits in India.
“The bank not only earns interest on the loan it has given to the NRI overseas, it also earns interest on the rupee loans it has extended in India from the $10 million deposit created free of exchange rate risk. This is a win-win for the depositor as well as the bank,” said a senior official with a private sector bank.
Banks recently sharply upped the interest rates on FCNR (B) US dollar deposits in the 3/5-year tenor. The interest rates have been increased to 6-7 per cent from the earlier 3 per cent levels.
This upward revision in interest rates comes in the wake of the RBI, as part of its June 5 measures to attract dollars to stabilise the rupee, announcing that it will bear the full hedging cost on fresh 3/5-year FCNR (B) deposits that banks mobilise up to September 30.
Moreover, such deposits have been exempted from statutory pre-emptions such as the cash reserve ratio and the statutory liquidity ratio, enabling banks to deploy the entire proceeds as loans.
Karthik Srinivasan, Group Head – Financial Sector Ratings, ICRA, observed that for larger banks, which have a large overseas branch presence, it becomes easier to service the NRI clients.
“Some of the banks have set up offices in GIFT City. Maybe, some money will flow in from there. Again, it depends how things play out. But clearly, it’s easier for banks which have overseas branches, which is what we saw in the past as well,” he said.
Among Indian banks’, State Bank of India (SBI) has the largest overseas presence, with 245 offices (including branches and offices of subsidiaries) spread across 29 countries.
The maximum interest rate SBI is offering on FCNR (B) deposits is on the 5-year tenor. For a deposit up to $1 million and above $1 million, it is quoting an interest rate of 5.75 per cent and 6 per cent, respectively. The earlier rate was 3.05 per cent.
SBI economists expect the banking system to mop up $40-45 billion through the FCNR (B) deposit route.
Published on June 16, 2026
