Indian banks are ramping up efforts to attract non-resident deposits from the Gulf, Singapore, and Hong Kong under the RBI's FCNR(B) scheme. With $4 billion already collected, lenders aim for a $60 billion target by September 30, 2026. This move helps banks strengthen their foreign currency liquidity while providing depositors with potentially attractive returns.
What Happened
Indian banks are actively seeking to boost their foreign currency deposits by focusing on the Gulf, Singapore, and Hong Kong. The initiative centers on the Reserve Bank of India’s (RBI) Foreign Currency Non-Resident Bank, or FCNR(B), deposit scheme. Large lenders, including State Bank of India, HDFC Bank, and ICICI Bank, are leading these mobilization efforts. As of early July 2026, the sector has already mobilized approximately $4 billion, with banks setting an ambitious target to reach $60 billion by the end of the window on September 30, 2026. A significant surge in these inflows is expected in August.
Why Banks Are Focusing on These Regions
The geographic concentration of the Indian diaspora in cities like Dubai, Abu Dhabi, and Singapore makes it easier for banks to connect with potential depositors. Unlike the United States and Europe, where the Indian community is more spread out, these regions allow for more direct and cost-effective engagement. By focusing on these hubs, banks hope to streamline the process of gathering funds while minimizing the logistical challenges associated with reaching a more dispersed global population.
The Role of RBI Hedging
One of the main features of the current FCNR(B) scheme is that the Reserve Bank of India is covering the cost of hedging. Hedging is a financial practice used to protect against the risk of currency fluctuations. Since the central bank is bearing these costs, banks are better positioned to offer competitive terms to non-resident depositors. This policy is a key supporting factor for the mobilization drive, as it reduces the currency-related risk that typically affects foreign currency-denominated deposits.
Challenges in Western Markets
While the focus remains on the Gulf and Singapore, flows from the US and Europe may face more resistance. Bankers have noted that US equity markets have been performing well, which may encourage investors to keep their money in stocks rather than moving it into bank deposits. Additionally, tax regulations and complex documentation processes in Europe continue to act as a barrier for potential investors. Even so, bankers believe that if there is a significant shift in global portfolios or if investors prioritize the fixed returns offered by these deposits—estimated by some to reach 18-20% in dollar terms over a five-year period—inflows from these regions could still rise.
What Investors Should Track
The most important monitorable for investors is the pace of deposit accumulation as the September 30, 2026 deadline approaches. A successful mobilization of $60 billion would significantly improve the foreign currency liquidity position for major Indian banks, which can assist in managing balance sheets. Investors may also look for management commentary in upcoming quarterly results regarding the impact of these inflows on their cost of funds and overall interest margins.