FCNR (B) deposits: Small, mid-sized private banks reach out to GIFT City IBUs to offer leverage to NRIs
3 min read
Out of the 33 banks active in GIFT City, India’s sole International Financial Services Centre, 18 are domestic—10 private‑sector and 8 public‑sector.
Mid‑tier private banks that lack overseas branches or a GIFT City footprint are eager not to miss out on the leverage advantage for raising new FCNR (B) deposits via the RBI’s temporary concessional swap facility.
They are looking to partner with big Indian banks operating in GIFT City, enabling their NRI clients to tap leverage and park larger sums in fresh FCNR (B) deposits for 3‑ to 5‑year tenors.
Should these partnerships materialise, the smaller private banks could issue standby letters of credit (SBLCs) to their NRI customers. Backed by the SBLCs, the customers would secure loans from the large banks’ IBUs in GIFT City, and the loan funds could then be routed as fresh FCNR (B) deposits to the issuing bank.
Among the 33 banks functioning in GIFT City—India’s sole IFSC—18 are Indian entities, comprising 10 private‑sector and 8 public‑sector lenders.
Nationally, there are 21 private‑sector banks and 11 small finance banks. A number of smaller private banks and some SFBs lacking a GIFT City presence are exploring collaborations with Indian banks that operate within the IFSC.
Currently, these mid‑sized private banks are advertising fresh FCNR (B) deposit rates between 7 % and 7.50 % to compensate for their limited ability to offer leverage to NRI clients.
Offering Leverage
Major lenders like SBI, HDFC Bank, ICICI Bank, Axis Bank, PNB and Bank of Baroda, unhindered by leverage constraints for their NRI clientele, are quoting rates near 6 %.
PN Vasudevan, MD & CEO of Equitas SFB, remarked: “We have begun talks with several banks active in GIFT City and a handful of foreign institutions. Our teams have toured GIFT City and are now engaging with banks in West Asia to explore potential arrangements.”
“However, the talks remain preliminary and no deal has been sealed. We are examining all options, though there is no guarantee these discussions will lead to concrete agreements.”
A senior executive at a private bank noted that GIFT City mainly serves as a funding hub, so banks based there first aim to satisfy the financing needs of their own customers.
“Only once internal demand is met would the IBUs look at financing other banks’ clients. Discussions with the banks in GIFT City are still underway,” he added.
Industry forecasts suggest that banks could raise roughly $30–50 billion in fresh FCNR (B) deposits by the end of September 2026, under the RBI’s temporary measures designed to enhance dollar liquidity and support rupee stability.
The RBI will cover the entire hedging expense for banks that raise FCNR (B) deposits with tenors of three to five years, and it has waived the statutory requirements of CRR and SLR for these deposits.
Published on July 22, 2026
