FM asks banks to step up NRI outreach as FCNR(B) mobilisation gathers pace

Finance Minister Nirmala Sitharaman on Monday asked chief executive officers (CEOs) of state-owned banks to step up outreach to non-resident Indians (NRIs) and introduce innovative deposit products to maximise mobilisation under the Reserve Bank of India’s (RBI’s) FCNR(B) scheme, with bankers reporting an encouraging response from the Indian diaspora, particularly in Singapore, Hong Kong, West Asia, the United Kingdom, the United States and other overseas markets.

On Monday, Sitharaman reviewed the progress of the RBI’s concessional swap facilities for FCNR(B) deposits, external commercial borrowings (ECBs) — overseas loans raised by eligible Indian companies — and overseas foreign currency borrowings (OFCBs) by financial institutions.

According to informed sources, around $8 billion has already flowed into the FCNR(B) deposit window, with State Bank of India (SBI) alone mobilising over $1.5 billion.

Banks told the finance minister that they are offering attractive returns on FCNR(B) deposits, including five-year deposits, aided by the RBI’s decision to suspend the interest rate ceiling on fresh deposits mobilised under the scheme.

While most state-owned banks are offering interest rates of 6-6.5 per cent on FCNR(B) deposits, some smaller private banks are offering up to 7.5 per cent.

“The public sector banks (PSBs) also informed that they have put in place customised outreach strategies, including digital channels, to engage with the non-resident Indian (NRI) diaspora and enhance deposit mobilisation. They further noted that FCNR(B) deposit mobilisation has shown a clear accelerating trend, supported by attractive returns being offered by banks,” the finance ministry said in a statement.

Most banks have opted for a 9x leverage structure under the scheme. Under this model, for every $1 million deposited by an NRI through FCNR(B) deposits, a bank can provide up to $9 million — either from its own balance sheet or from overseas lenders backed by a standby letter of credit (SBLC) — allowing banks to significantly enhance returns for NRIs, which bankers estimate could exceed 15 per cent. This would also help banks mobilise more under the scheme.

In addition, several lenders have tapped the overseas bond market to capitalise on the RBI’s concessional swap facility. HDFC Bank has raised $750 million, while Axis Bank, SBI and Power Finance Corporation (PFC) have each raised $300 million.

The bank chiefs also outlined their plans to capitalise on the positive sentiment and accelerate deposit mobilisation during the remainder of the scheme period, expressing confidence that ECB mobilisation would gather stronger traction during the third quarter of FY27 (October-December 2026).

The banks further informed the finance minister that International Banking Units (IBUs) at the International Financial Services Centre (IFSC), GIFT City, are being used to mobilise funds from multiple jurisdictions, including the UK, the US, West Asia, Hong Kong, Singapore and Southeast Asia. Sitharaman urged banks to “maximise utilisation of financial services and institutional infrastructure available at GIFT City”.

During the meeting, the RBI Deputy Governor assured banks that the central bank was “actively supporting banks and financial institutions in mobilising deposits and facilitating eligible borrowings”. The statement added that the RBI’s daily reporting framework had enabled “transparent, real-time monitoring of progress across participating institutions”.

The finance ministry said that the “sustained and broad-based participation” of public sector banks, private sector banks and public financial institutions underscored the effectiveness of the swap facilities in mobilising foreign currency inflows, reinforcing India’s foreign exchange reserves and strengthening the resilience of the external sector amid global uncertainty.

The RBI, on June 5, announced various measures to attract foreign inflows into the country. These included a US dollar-rupee forex swap facility at par for fresh FCNR(B) deposits and a concessional swap facility for eligible ECBs and OFCBs, aimed at attracting foreign capital, strengthening the balance of payments and incentivising capital inflows. The FCNR(B) deposit window will remain open until September 30, 2026, while the ECB and OFCB facilities will remain available until December 31, 2026.