Industry Odisha Bureau, Sep 05: FCNR(B) inflows reached $127.23 billion during the 85-day forex swap scheme. Around 80% came through the leverage route, bankers estimate. Five-year deposits dominated overall mobilisation across participating banks nationwide. Attractive interest rates supported strong NRI demand throughout the period.
The scheme ran from June 8 to August 31, 2026. This 85-day window offered rates between 6% and 7.5%. These relatively high rates attracted significant non-resident Indian participation. More than two-thirds of deposits chose the five-year tenure.
The leverage route worked through a straightforward lending structure. Banks extended loans to NRIs for specific redeployment purposes. Borrowers redeployed those loan proceeds into FCNR(B) deposits themselves. This structure amplified deposit mobilisation beyond organic capital alone.
Non-leveraged and non-SBLC-backed deposits made up less than 10%. SBLC-backed deposits accounted for roughly 10-12% of inflows. Leverage therefore remained the dominant driver throughout the period. Bank-level figures show ICICI Bank raised $17.88 billion overall.
HSBC mobilised $14.5 billion, followed by HDFC Bank’s $12 billion. SBI raised $10 billion, while Standard Chartered collected $5 billion. IDFC First Bank and RBL Bank raised $3.57 billion and $3.4 billion respectively.
Most inflows originated from West Asia, Europe and parts of Africa. US-based account holders faced distinct tax considerations under FATCA rules. Interest earned on loans can carry significant tax implications there. This pushed leveraged participation toward non-US NRI markets instead.
Banks also leveraged International Banking Units based in GIFT City. This approach reduced dependence on SBLCs from other institutions. It also helped avoid additional costs tied to those guarantees. GIFT City infrastructure proved useful for structuring these leveraged deposits.
An illustrative example shows how leverage boosted potential returns. An NRI depositing $100,000 at 6% could borrow $900,000. That loan, priced at 5.4%, was redeployed into another deposit. The resulting 0.6-point spread generated $5,400 in additional earnings.
Combined with the original $6,000, total earnings reached $11,400. This produced an effective return of 11.4% on capital. Market discussions mentioned leverage as high as 19 times. That level was reportedly linked to a British bank specifically.
For most banks, however, leverage stayed closer to nine times. This scale of borrowing significantly boosted overall FCNR(B) mobilisation. The scheme’s success reflects both attractive rates and structured leveraged participation across India’s banking sector during this concessional window.
