Stacks of foreign currency on a banking desk in India.
Indian banks are actively seeking guidance from the Reserve Bank of India (RBI) regarding the permissibility of allowing their overseas branches to lend to non-residents against Foreign Currency Non-Resident (Bank) or FCNR(B) deposits. This move aims to tap into potential opportunities for structured products that could offer attractive yields to Non-Resident Indians (NRIs).
Several lenders, including the State Bank of India (SBI), have reportedly already introduced such structured products, where FCNR(B) deposits serve as collateral for loans. Bankers are keen to secure explicit regulatory comfort from the RBI, especially as a special window for attracting NRI deposits is set to close in September. The expectation is that these leveraged structures could significantly boost NRI deposits by offering potentially higher returns compared to standard deposit offerings.
The push for clarity underscores the banks’ strategy to attract and retain foreign currency deposits, which are crucial for managing liquidity and foreign exchange reserves. The success of these leveraged FCNR(B) deposit structures hinges on the RBI’s regulatory stance and the perceived risk appetite among both NRIs and the financial institutions involved.
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