RBI introduces a new avenue for NRI deposits
The RBI has declared that it will provide a subsidy of 1.5% to offset the hedging costs associated with deposits made through the Foreign Currency Non-Resident (FCNR(B)) scheme and external commercial borrowings (ECBs). Banks may pass on this subsidy as additional interest to entice overseas depositors.
How $1 Million could increase to over $1.8 Million
While banks have yet to disclose the current interest rates for FCNR(B) deposits, let’s consider a return of 6.5% that includes the subsidy.
The RBI had previously launched a similar initiative in 2013, allowing depositors to leverage their own equity. This means if you possess $1 million in cash, you could borrow up to $10 million locally (with a leverage ratio of 10 times), where loans are generally offered at much lower rates, and then invest that money in India, should the regulator facilitate comparable leverage levels.
In such a scenario, NRIs might convert a million dollars today into more than $1.8 million within just three years.
Here’s a sample calculation based on estimates: The Strength of FCNR deposits and borrowing
| Particulars | Amount |
| A NRI’s cash on hand | $100,000 |
| Borrowed from an overseas bank | $900,000 |
| Total deposit under FCNR(B) | $1 million |
| Leverage | 9x |
| Assumed interest rate on local deposit (abroad) | 4% |
| Bank fee for currency swap | 0.8% |
| Total borrowing cost | 4.8% |
| Assumed interest rate in India | 6.5% |
| Interest earned in India annually | $65,000 |
| Interest paid on borrowed funds | $43,000 |
| Return on investment | $22,000 (21.8%) |
*Calculations based on research from Emkay Global
Experts suggest that this scheme is too appealing to overlook, resulting in a significant influx of foreign exchange into India. With potential access to funds sourced at a lower cost abroad and the additional hedging subsidy from the RBI, bank shares in India are currently very active in trading.
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First Published: Jun 9, 2026 11:40 AM IST
