Indian banks are increasingly tapping Gulf-based non-resident Indians and the UAE as part of a temporary scheme to boost foreign currency non-resident bank deposits, with the deadline approaching on September 30.
The United Arab Emirates has emerged as the main engine of India’s recent foreign currency deposit push, with banks finding the strongest response from Gulf-based non-resident Indians even as interest from the US and UK remains softer, according to the Economic Times’ BFSI report. The surge is tied to a temporary Reserve Bank of India scheme designed to lift foreign currency non-resident bank, or FCNR(B), deposits and draw dollar inflows at a time when lenders are seeking more stable funding.
RBI data show outstanding FCNR(B) balances climbed to $60.55 billion by July 30 from $32.56 billion on June 5, while $36.7 billion had been mobilised under the special swap facility by July 31. Banks are using higher FCNR(B) rates, leveraged products and their GIFT City operations to draw in deposits, particularly from the Gulf, where regulatory constraints in the UAE appear to have helped channel funds towards Indian lenders.
The mobilisation campaign has become a race against time, with the special window set to close on September 30. Banks are now working to deepen relationships with overseas Indian customers and lock in more dollar funding before the facility ends.
Several lenders are already reporting early traction. Canara Bank has said it mobilised about ₹100 crore in FCNR(B) deposits and is targeting ₹1,000 crore to ₹2,000 crore by the end of September, helped by its footprint in Dubai, the US and UK as well as its large NRI base in Kerala and Karnataka. Bank of India has set a goal of $1.2 billion by September-end to replace bulk deposits and reduce funding costs, while Indian Overseas Bank said it had raised $300 million within three weeks and expects more than $500 million. Central Bank of India, meanwhile, has only begun to scale up but is targeting $400 million and plans to use its GIFT City International Banking Unit to accelerate inflows.
For lenders, the appeal goes beyond the immediate deposit push. FCNR(B) mobilisation offers a way to diversify funding, reduce reliance on expensive wholesale borrowings and, in some cases, support loan growth. ICICI Bank has said the scheme may slightly pressure net interest margins, but sees its wider earnings impact as manageable. The broader outcome will depend on how much more money can be pulled in from the Gulf before the September deadline.
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