State Bank of India (SBI) has moved quickly to take advantage of the Reserve Bank of India’s (RBI) newly introduced concessional framework for foreign currency non-resident (bank) deposits, offering a high-leverage structure of up to nine times on FCNR(B) investments. The bank is the first major lender to operationalise the scheme following the RBI’s announcement earlier this month.
Under the facility, customers making dollar-denominated deposits of $1 million or more in FCNR(B) accounts can access loans worth up to $9 million against their deposits. This effectively allows investors to significantly amplify their exposure through structured borrowing backed by foreign currency deposits.
For deposits with a five-year maturity, SBI has set the loan interest rate at 5.4 per cent, while offering a deposit rate of 6 per cent. According to the bank’s calculations, the structure results in an estimated return on investment of 14.08 per cent after factoring in the leverage effect, making it an attractive proposition for eligible investors.
The scheme is designed to enhance foreign currency inflows into the Indian banking system while providing non-resident depositors with enhanced yield opportunities. SBI’s early move to implement the structure signals strong competition among lenders to capture inflows under the RBI-backed framework.
Market participants suggest that the leverage-based FCNR(B) product could boost dollar deposit mobilisation if global interest rate conditions remain stable and investor appetite for emerging market yields persists.
