Banks dangle mega returns to lure NRIs to FCNR(B) deposits

In an aggressive move to draw overseas Indian funds, banks are highlighting their FCNR(B) deposit product, promising dollar‑linked yields of up to 14 % per year together with a leverage option. Targeted at affluent NRIs, the scheme couples dollar‑denominated term deposits with borrowing against those deposits, boosting upside potential.

Lenders with extensive international networks—SBI, Bank of Baroda, Bank of India, ICICI Bank, Axis Bank and HDFC Bank—are in a stronger position to pull in FCNR(B) deposits via the RBI’s temporary swap facility.

leverage advantage

A major bank has sent out a notice to its NRI customers proposing a plan that calls for a minimum of $1 million, locked in for three to five years. The base deposit rate sits between 5.5 % and 6.0 %, while the main attraction is the leverage feature that lets clients borrow up to nine times their deposited amount. By re‑investing the borrowed sum, the bank forecasts markedly higher effective returns after deducting financing costs.

Being dollar‑based, the product shields investors from currency fluctuations at maturity and guarantees full repatriation of both principal and interest—critical points for those living abroad.

Through its overseas branches and subsidiaries, the bank can extend a $9 million loan against a new $1 million deposit. The loan proceeds can be redeposited as a fresh FCNR(B) placement at the prevailing promotional rate. In effect, the bank ends up with a $10 million FCNR(B) exposure while having lent out $9 million.

high stakes play

The bank is positioning this as a sophisticated, high‑reward opportunity for NRIs who want to boost returns within a stable‑currency environment.

The overseas arms of these banks, including subsidiary offices, can grant loans to NRIs backed by their current or newly opened FCNR(B) deposits in India.

“The bank not only collects interest on the loan extended to the NRI abroad, it also gains interest on the rupee loans it funds in India using the $10 million deposit that carries no exchange‑rate exposure. This creates a win‑win for both the investor and the bank,” remarked a senior executive at a private‑sector lender.

Banks have recently lifted the rates on FCNR(B) US‑dollar deposits for the three‑ to five‑year bucket, moving them from around 3 % to the 6‑7 % range.

This rate hike follows the RBI’s June 5 initiative to lure dollar inflows and steady the rupee, under which the central bank will cover the entire hedging expense on new FCNR(B) deposits of three to five years that banks gather by September 30.

Furthermore, these deposits are exempt from reserve requirements like the cash reserve ratio and statutory liquidity ratio, allowing banks to lend out the full amount.

Karthik Srinivasan, Group Head – Financial Sector Ratings at ICRA, noted that bigger banks with extensive overseas networks find it simpler to serve NRI clientele.

“Several banks have opened offices in GIFT City, so we might see some inflows from that hub. Ultimately, it will depend on how circumstances evolve, but it is evident that lenders with overseas branches have an advantage, a pattern observed previously,” he added.

Among Indian lenders, the State Bank of India (SBI) boasts the widest international footprint, operating 245 outlets—including branches and subsidiary offices—in 29 nations.

SBI’s top rate for FCNR(B) deposits applies to the five‑year term. It quotes 5.75 % for amounts up to $1 million and 6.00 % for sums exceeding $1 million, up from the previous 3.05 %.

SBI’s economists project that the banking sector could attract $40‑45 billion via the FCNR(B) channel.

Published on June 16, 2026