State Bank of India (SBI) is set to become the first major lender to operationalize the RBI's new FCNR(B) deposit mobilization framework through GIFT City branches. According to Financial Express, SBI will offer leverage facilities up to nine times the deposit amount for NRIs and high-net-worth individuals (HNIs) under its 'Advantage FCNR(B) Deposit Scheme'. The bank's GIFT City branch in Ahmedabad will provide interest rates of 5.50% for three-year deposits, 5.75% for four-year deposits, and 6% for five-year deposits. This development marks a significant expansion of SBI's existing FCNR(B) operations, as the bank already offers loans against FCNR(B) deposits maintained at its India branches through its GIFT City unit. The scheme enables customers to raise financing from overseas lenders using these deposits as collateral, creating new funding opportunities for NRIs and HNIs.
The Reserve Bank of India (RBI) has issued detailed clarifications on its recently announced swap facility for Foreign Currency Non-Resident (Bank) deposits, providing operational guidance to participating banks. According to the FAQs released by the central bank, banks will be permitted to provide loans to non-resident Indians (NRIs) against their FCNR(B) deposits, though lenders will be required to mark a lien on the underlying deposits to secure such loans. The RBI has clarified that under the special swap facility, it will bear the hedging cost only on the principal amount of eligible FCNR(B) deposits and not on the interest component, aimed at helping banks accurately price deposits mobilised under the scheme. The facility is a plain buy/sell foreign exchange swap from the RBI side covering only the principal amount of the deposits and not the interest component, as confirmed by the central bank. The clarifications cover the special swap facility for FCNR(B) deposits, external commercial borrowings (ECBs) and overseas foreign currency borrowings (FCBs), providing comprehensive operational guidance to participating banks.
The Reserve Bank of India (RBI) has now allowed banks to mobilize FCNR(B) deposits through their GIFT City branches, opening a new channel to attract NRI and HNI funds. Under the new framework, Indian banks can use their International Financial Services Centre (IFSC) banking units in GIFT City to mobilize FCNR(B) deposits and offer leverage facilities linked to those deposits. As reported by Financial Express, this development marks another step in the RBI's efforts to deepen the role of GIFT City as a global financial services centre and create alternative channels for foreign currency mobilisation. SBI, which operates 244 international offices across 29 countries, already offers loans against FCNR(B) deposits maintained at its India branches through its GIFT City unit, and the latest regulatory clarity now allows the bank to expand the offering further. The move is expected to widen access to non-resident deposits, particularly for banks with limited overseas presence, while also creating new funding opportunities for high-net-worth individuals and non-resident Indians.
The RBI's decision has enabled banks to offer significantly more attractive returns on foreign currency deposits, with industry participants noting that banks are now able to offer rates of up to 7.1% on certain FCNR(B) deposits, bringing returns broadly in line with domestic fixed deposits. According to Crisil Intelligence's latest report on the Indian banking sector, the RBI's decision to withdraw the interest rate ceiling on fresh foreign currency non-resident (FCNR-B) deposits of three-five year tenors till September 30 provides banks greater flexibility to offer competitive rates, thereby supporting foreign currency deposit inflows. The report indicates that the contribution of the rest-of-the-world (ROW) segment, comprising non-resident deposits, to overall bank deposits may witness a modest uptick in fiscal 2027, providing supplementary support to deposit growth. This comes as the broader banking system continues to face challenges with credit growth outpacing deposit growth, with the system-level credit-deposit ratio remaining above 81 per cent. Banking stocks could remain in focus after brokerages highlighted the potential benefits of the RBI's latest clarifications on the FCNR(B) deposit swap scheme, although analysts believe banks may still need to offer more attractive rates to meaningfully boost deposit mobilisation.
The RBI's latest move is particularly significant for banks that do not have substantial overseas operations, as only a handful of lenders, including SBI, Bank of Baroda, Bank of India and ICICI Bank, had substantial international operations that allowed them to access foreign currency deposits directly from NRIs. Smaller lenders had argued that their GIFT City branches function as offshore banking units and should therefore be allowed to mobilize FCNR(B) deposits in the same manner as overseas branches. Citi believes the changes create a significantly stronger proposition for Indian banks, with banks with stronger global distribution networks, deeper overseas reach and the ability to move quickly likely to benefit the most. Large private-sector banks with strong international franchise networks, overseas branches and better liability franchises are seen as the biggest beneficiaries. Banks with faster execution capability and stronger NRI reach are expected to gain market share in FCNR(B) mobilisation. The FAQ removes operational ambiguity that had initially limited aggressive participation by banks, with brokerages believing the latest framework could potentially drive stronger foreign currency deposit inflows and overseas borrowings than the 2013 FCNR(B) scheme.
