RBI opens a new window for NRI deposits
The RBI has announced that it would offer a subsidy of 1.5% to cover the hedging cost for deposits under Foreign Currency Non-Resident (FCNR(B)) scheme and external commercial borrowings (ECBs). Banks can pass on the subsidy as added interest to attract depositors abroad.
How $1 Million could grow to over $1.8 Million
While banks are yet to reveal the latest interest rates on FCNR(B) deposits, let’s assume a return of 6.5% including the subsidy.
The RBI had introduced the same scheme in 2013 and it allowed the depositor to leverage their personal equity, i.e. if you have $1 million in cash, you could borrow up to $10 million (assuming a leverage of 10 times) locally — where loans are available at a much lower rate — and park that money in India, if the regulator allows similar levels of leverage.
In such a scenario, NRIs may be able to turn a million dollars today into more than $1.8 million in just three years.
Here’s a sample calculation based on estimates: The Power of FCNR deposits and borrowing
| Particulars | Amount |
| A NRI’s cash in hand | $100,000 |
| Borrowed from a foreign bank | $900,000 |
| Total deposit under FCNR(B) | $1 million |
| Leverage | 9x |
| Assumed interest rate on local deposit (abroad) | 4% |
| Bank charge for currency swap | 0.8% |
| Total borrowing cost | 4.8% |
| Assumed interest rate in India | 6.5% |
| Interest earned in India per year | $65,000 |
| Interest paid on borrowing | $43,000 |
| Return on investment | $22,000 (21.8%) |
*Calculations based on research from Emkay Global
Experts believe te scheme is just too attractive for anyone to ignore, and, therefore, it may lead to a flurry of precious foreign exchange flowing into India. With likely access to funds raised at a cheaper rate abroad, along with the added hedging subsidy from the RBI, bank stocks in India are red hot in trade today.
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First Published: Jun 9, 2026 11:40 AM IST
