Home / Business and Economy / Banks Favor Million-Dollar NRI Deposits Amidst Rising Costs
Banks Favor Million-Dollar NRI Deposits Amidst Rising Costs
13 Jul
Summary
- Indian banks now prioritize NRI depositors with over $1 million.
- Rising overseas funding costs impact leveraged FCNR deposit margins.
- April FCNR inflows were only $166 million, falling short of targets.
Indian banks are becoming highly selective about accepting Foreign Currency Non-Resident (FCNR) deposits from Non-Resident Indians (NRIs). As of July 13, 2026, lenders are increasingly prioritizing deposits exceeding $1 million. This strategy shift is primarily due to rising overseas borrowing costs and tighter credit limits, which make smaller leveraged FCNR deposit structures unviable.
Initially, Reserve Bank of India's (RBI) June 5 announcement aimed to attract significant inflows, with analysts anticipating around $40 billion. However, recent data from April 2026 shows fresh FCNR(B) inflows totaled only $166 million. The outstanding FCNR(B) deposit base was $33.92 billion at April-end.
Experts note that the economic viability of these leveraged FCNR deposit schemes is significantly impacted by current global funding costs. The difference between borrowing costs and FCNR deposit rates leaves little room for banks to absorb higher expenses. This contrasts with the 2013 FCNR mobilization, leading some to suggest sovereign dollar bonds as a more effective alternative for attracting foreign capital.
Market participants indicate that while documentation issues are being resolved and marketing efforts may increase, the current environment presents considerable challenges for executing these schemes. The selectivity highlights concerns about the overall effectiveness in strengthening India's external position, despite potential inflows.
