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RBI to absorb hedging costs as banks target ₹35-40B in NRI deposits

The central bank is removing barriers to FCNR(B) deposits to attract dollar inflows from non-residents, allowing Indian banks to offer rates that compete with U.S. Treasury yields.

₹35-40 billionTarget NRI deposit mobilisation

Economy2 min read

⬩A massive, coordinated financial maneuver is currently underway. Indian banks are preparing to raise a staggering 35to40 billion through the Foreign Currency Non-Resident (Bank) d
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$3 billionPunjab National Bank target
3-5 yearsFCNR(B) tenor incentivised

The Reserve Bank of India has announced a targeted measure to draw foreign currency deposits from non-resident Indians. Banks will now be exempted from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements on FCNR(B) deposits maturing in 3 to 5 years, and the RBI will bear the full hedging cost on these deposits.

This removes a structural cost barrier that previously made NRI deposits less attractive to Indian banks. Because banks no longer absorb hedging expenses, they can offer interest rates that compete with or exceed current U.S. Treasury yields—a compelling proposition for diaspora savers.

The mechanics are straightforward: the RBI supplies the incentive structure, banks mobilize capital from NRI networks, and dollar inflows reach India's balance sheet. Punjab National Bank's new MD & CEO Ashok Chandra described the scheme as a "win-win," and PNB alone is targeting up to $3 billion from diaspora bases in the U.S., U.K., and Middle East.

The total target is ₹35-40 billion across the banking system. This is a defensive macroeconomic tool—rather than drawing down forex reserves to defend the rupee during volatility, the RBI is using incentives to pull global retail capital into the system organically.

For banks, the scheme reduces funding costs and CRR/SLR drag on deposit mobilization. The economics are clean: attract NRI money at competitive rates, keep the hedging arbitrage, and redeploy the forex on the balance sheet without reserve depletion.

Why it matters

For loan distributors and DSAs, this signals confidence in rupee stability and capital availability in the system. Stronger forex buffers and lower banks' funding pressure typically translate to looser credit cycles, more competitive lending rates, and faster loan approvals. NRI deposit mobilization is also a softer currency defence than tightening, so it reduces the risk of policy-induced credit crunches that can slow disbursals.

The scheme also underscores how the RBI is using targeted incentives rather than broad rate hikes to manage currency and liquidity. For lenders and connectors, this means the policy environment remains supportive to credit growth. Banks that successfully mobilize NRI deposits gain balance-sheet room to lend, which directly benefits the distribution network's volume and pricing.

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Finsamudra DeskNewsroom · 9 Jun 2026, 12:30 pm IST
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