Indian banks are executing an unprecedented $43 billion dollar fundraising campaign through offshore loans by 2026, with $30 billion targeted for the remainder of the year following the Reserve Bank of India's special forex swap facility. According to The Economic Times, this surge in dollar demand from Indian lenders racing to boost foreign currency deposits is firing up global bond and loan markets, with major international banks rushing to capture the business. Mitsubishi UFJ Financial Group and Standard Chartered Plc are working to secure deals for both dollar bonds and loans, while Citigroup Inc., HSBC Holdings Plc and Barclays Plc are also in active discussions with local financiers. The flurry of fundraising will help Indian banks raise as much as $30 billion through offshore loans for the rest of 2026, adding to the $12.7 billion that have been secured so far. Separately, Indian banks and state-run financiers are expected to raise up to $10 billion from the global bond market for the remainder of the year, according to MUFG, on top of the $10.8 billion raised so far, a five-year high.
Private sector banks have emerged ahead of public sector banks in mobilising Foreign Currency Non-Resident Bank (FCNR(B)) deposits under the Reserve Bank of India's limited-period US Dollar-Rupee forex swap facility. According to latest data, private banks collectively garnered $10.73 billion during the June 5-July 30, 2026 period, with six lenders accounting for the bulk of inflows. Among the 20 private sector banks, four lenders - ICICI Bank, Kotak Mahindra Bank, Axis Bank and HDFC Bank - mobilised more than $1 billion each through FCNR(B) deposits. In contrast, among the 12 PSBs, only State Bank of India and Bank of Baroda crossed the $1 billion mark, with PSBs together mobilising $8.84 billion. Among the 12 foreign banks participating, HSBC dominated with $6.14 billion, while Standard Chartered Bank was the only other lender to cross the $1 billion threshold, mobilising $1.85 billion. Citi reports that private banks mobilised $10.7 billion, accounting for 38.3% of net inflows—almost exactly in line with their deposit market share, while foreign banks contributed another $8.4 billion, or 30%, led by HSBC and Standard Chartered.
The rate increases come after the Centre reduced hedging costs for FCNR(B) deposits, allowing banks to pass some relief to customers. The Reserve Bank of India (RBI) in June said that hedging costs on three-to-five-year FCNR(B) deposits will be borne by the government till 30 September this year, as reported by Mint. This development benefits NRIs looking to invest in bank FDs to earn tax-free interest. HDFC Bank has implemented a one-year lock-in period for FCNR deposits booked between June 10, 2026 to September 30, 2026, applicable to deposits with tenures of 3 to 5 years. For customers booking through netbanking, HDFC Bank processes requests within two working days, except on Saturdays, Sundays, public holidays in India and international currency holidays, with actual interest rates applied at processing time. The success of the RBI's special scheme has been remarkable, with outstanding FCNR(B) deposits rising to $60.55 billion from $32.56 billion on June 5. According to The Economic Times, Minister of State for Finance Pankaj Chaudhary said the forex swap facility for fresh FCNR(B) deposits is intended to attract stable foreign currency inflows, strengthen India's balance of payments and help ease recent pressures on the Indian rupee.
A surge in dollar demand from Indian lenders racing to boost the leverage on foreign currency deposits they are offering to overseas citizens is firing up global bond and loan markets, with major international banks rushing to capture the business. Mitsubishi UFJ Financial Group and Standard Chartered Plc are working to secure some of the deals for both dollar bonds and loans, with executives from the companies confirming their involvement. Other global banks including Citigroup Inc., HSBC Holdings Plc and Barclays Plc are also in active discussions with local financiers to arrange their dollar debt raising plans. The flurry of fundraising will help Indian banks raise as much as $30 billion through offshore loans for the rest of 2026, adding to the $12.7 billion that have been secured so far, potentially raising the year's total to a record at nearly $43 billion. Separately, Indian banks and state-run financiers are expected to raise up to $10 billion from the global bond market for the remainder of the year, according to MUFG, on top of the $10.8 billion raised so far, a five-year high. Foreign lenders who generally run significant large dollar balance sheets and want to increase their exposure to India are in pole position to provide the funding or help arrange bond sales, with such is the rush that Indian lenders including HDFC Bank Ltd., Axis Bank Ltd., State Bank of India and Power Finance Corp. comprised 40% — or $4.2 billion — of the dollar bond sales in the past two months.
The success of the RBI's special scheme has been remarkable, with outstanding FCNR(B) deposits rising to $60.55 billion from $32.56 billion on June 5. According to The Economic Times, Minister of State for Finance Pankaj Chaudhary said the forex swap facility for fresh FCNR(B) deposits is intended to attract stable foreign currency inflows, strengthen India's balance of payments and help ease recent pressures on the Indian rupee. He noted that fresh FCNR(B) deposits mobilised by banks will be swapped with the RBI, boosting foreign exchange reserves and banking system liquidity in the first leg of the transaction, while the process will be reversed upon maturity. The currency had declined to a record low in May but has steadied after the measures were announced in June. A similar effort in 2013 had raised $26 billion, while this current initiative is expected to significantly exceed that amount with total inflows projected to reach $80-100 billion. Jefferies expects the liquidity boost to benefit the broader banking system, particularly NBFCs and smaller private banks that are more sensitive to funding conditions, with several large private lenders already raising FCNR(B) deposit rates by 10-25 basis points.
