Banking units in GIFT City have disbursed $52.82 billion in FCNR(B)-linked loans, with total sanctions hitting $54.02 billion by August 31, 2026. The surge followed the RBI’s special swap window, which saw inflows exceed $136 billion before its early closure. While this highlights GIFT City's growth as a financial hub, investors should be aware of risks including the lack of deposit insurance and potential tax complexities for non-residents.
International Banking Units (IBUs) based in GIFT City have completed a massive deployment of funds, disbursing $52.82 billion in loans backed by Foreign Currency Non-Resident Bank (FCNR-B) deposits by August 31, 2026. Official data confirms that total sanctioned credit under this specialized scheme reached $54.02 billion. This activity followed a record-breaking surge in foreign currency inflows, prompting the Reserve Bank of India (RBI) to close its special USD-INR swap facility one month ahead of schedule.
The surge in lending was primarily fueled by the RBI’s concessional swap window, which allowed banks to manage currency risk efficiently. By absorbing hedging costs, the central bank enabled lenders to offer competitive interest rates on dollar-denominated loans. Banks utilized this framework to extend leveraged loan products, sometimes offering high leverage ratios depending on the specific institution’s risk appetite. This strategy allowed Non-Resident Indians (NRIs) to access significant liquidity by leveraging their FCNR(B) holdings in India.
While this credit expansion signals a robust adoption of GIFT City as a cross-border financial hub, investors should understand the specific risks associated with these products. Unlike domestic bank deposits in India, funds placed in GIFT City IBUs are not covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). This means depositors do not have the same safety net if a banking unit faces solvency issues. Furthermore, while interest earned on FCNR(B) accounts may be tax-free in India, it is often subject to tax laws in the investor’s country of residence, such as the United States or United Kingdom, creating potential compliance requirements under regulations like FATCA.
Beyond FCNR(B) products, these banking units have also played an active role in the broader corporate finance market. Between April and August 2026, they disbursed $11.62 billion in External Commercial Borrowings (ECBs). As the special swap window is now closed, the focus for the market will shift toward how banks manage the existing loan books and whether the high leverage levels impact future liquidity. Investors should monitor how these units manage potential interest rate mismatches, as the cost of borrowing is often floating, while the returns on deposits may be fixed.