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RBI Clarity Sought on NRI Deposit Leverage
22 Jun
Summary
- Banks seek RBI clarity on overseas branches lending to NRIs for deposits.
- SBI offers leveraged product where FCNR(B) deposit secures loan.
- Clarification needed before banks widely market leveraged FCNR products.
Indian banks are actively seeking regulatory guidance from the Reserve Bank of India (RBI) concerning leveraged FCNR (B) deposits. The core of the inquiry revolves around whether an overseas branch of a bank can extend loans to non-residents, who then use these funds to create FCNR (B) deposits with the bank's Indian entity. This structure is particularly being examined to ensure compliance with existing deposit mobilization rules.
State Bank of India (SBI) has already launched a product in select overseas markets that allows customers to obtain a foreign-currency demand loan, funded by the deposit itself, which is pledged as collateral. While SBI asserts regulatory checks were performed, other commercial banks are requesting explicit comfort from the RBI before widely promoting such leveraged offerings. This clarification is seen as crucial to attract more diaspora funds before the RBI's special swap window closes on October 16 for deposits mobilized until September 30.
