彭博复盘印度央行FCNR外币存款激励计划：海外印度人存款创纪录达1270亿美元，窗口已于8月31日提前关闭，卢比成为亚洲第二强货币

In June, India turned to its 35 million-strong diaspora to help stem a sharp decline in the rupee.

The country’s central bank gave local lenders an incentive to attract foreign-currency deposits and potentially draw in billions of dollars from Indians living overseas. It last deployed a similar strategy during the “taper tantrum” of 2013 that led to massive outflows of capital from emerging markets. Banks mobilized about $26 billion at the time, helping to limit the hit to India’s foreign reserves.

This time around, Indian bankers were initially hoping to draw in at least $80 billion. The result far exceeded expectations: Lenders collected a record $127 billion in foreign-currency deposits. Including other foreign-currency loans encouraged by the measures, the scheme attracted more than $136 billion in total. The response was so strong that the Reserve Bank of India closed the deposit window on Aug. 31, a month earlier than planned.

The scheme has had a positive — albeit limited — effect on the currency. As of early September, the rupee was Asia’s second-best performer, and the influx of foreign currency has given the central bank a formidable buffer to deal with global volatility.

How did the scheme work?

Indian banks take a risk when they handle foreign-currency deposits, because swings in exchange rates can expose them to losses. The RBI offered to take on that risk by bearing the currency-hedging costs for so-called Foreign Currency Non-Resident (FCNR) deposits. After the program started to attract more money than expected, the original Sept. 30 deadline was brought forward.

Here’s how it worked: If an Indian living abroad deposited $100,000 in a foreign-currency account at a bank in India, they could then borrow a much larger amount at a bank overseas using the deposit as collateral. The borrowed money could then be transferred to the account in India. As long as the deposit paid a higher interest rate than on the loan, the depositor could earn a return on the difference. Some lenders offered loans amounting to several times the original deposit placed at a participating bank.

Depositors can’t withdraw the money in the first year, and must pay a penalty if they do so later before the agreed term ends.

What made this advantageous for banks?

Many overseas Indians maintain strong financial ties with their homeland, holding bank deposits there, sending money back to support their families and investing in Indian assets. Inbound remittances topped $155 billion in the 2025-26 financial year.

For the past two years, deposit growth has lagged demand for loans in India’s banking system. The arrangement will give banks access to a fresh pool of dollar funds from non-resident Indians, helping them to strengthen their deposit base.

The additional funding will help reduce Indian banks’ reliance on costlier, short-term debt instruments and ease competition for local funding sources, potentially lowering the cost of lending to businesses.

Since the RBI subsidized the initiative by bearing the cost of hedging for currency fluctuations, Indian banks were able to make the deposits more attractive than in normal times for overseas Indians looking for stable dollar returns. For instance, when the program began on June 5, five-year US Treasuries yielded around 4.3%, compared with as much as 6% on a similar-maturity FCNR deposit at State Bank of India, the country’s largest bank.

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Can it be risky?

Although the special incentive window has closed, the deposits — and the risks associated with them — remain. While there is no currency risk for non-resident Indians on the deposits themselves, so-called leveraged strategies that involve borrowing money abroad to deposit it in India come with their own set of dangers.

If the borrowing carries a floating interest rate, rising global interest rates could erode or even eliminate the return. Borrowing at a fixed rate mitigates that risk by locking in financing costs for the life of the investment.

Liquidity is another consideration. As FCNR deposits have a lock-in period of one year, investors are limited in their ability to access the funds early without penalties or a loss of interest. That can prove problematic if depositors suddenly need their money back. If a customer withdraws funds after the minimum lock-in period but before maturity, the bank faces the risk of a mismatch between its assets and liabilities.

Differences in tax rules across countries pose another risk, as the interest earned on the deposits may be treated differently by the depositor’s country of residence. While that interest is tax-free in India, changes in international tax laws, reporting requirements or the availability of tax treaty benefits could reduce the effective returns and make leveraged investments less attractive.

For the RBI, too, these inflows have created future liabilities. If the rupee weakens sharply while the deposits remain outstanding, the central bank’s contracts with banks could put the authority at a loss on its books.

How have these incentives affected the rupee?

The rupee has gained about 1.4% since the RBI announced the measures in early June and is now well above its record low of around 97 per dollar hit in late May. But the rise is much smaller than the 10% gain the rupee recorded when the RBI took a similar step in 2013.

The central bank still faces multiple challenges, ranging from elevated US interest rates to surging crude oil prices. Even so, the massive foreign-currency inflows have given the RBI ample firepower to defend the currency if it comes under renewed pressure. The monetary authority has already been much more visible in the foreign-exchange market over the past few weeks, intervening to curb rupee volatility. Strategists expect the currency to remain supported in the coming months, potentially breaking the cycle of persistent weakness that began in 2025.