Banks are seeing a gradual increase in mobilisation under the Reserve Bank of India's revised Foreign Currency Non-Resident Bank (FCNR-B) deposit scheme, with lenders expecting collections to accelerate from the middle of July as awareness among overseas Indians improves, according to people familiar with the matter.
The banking industry has mobilised an estimated $3-4 billion through FCNR-B deposits so far, the people said. Bankers expect inflows to gather pace in the coming weeks, particularly from non-resident Indians (NRIs) based in the Gulf region.
The revised scheme is expected to attract $40-50 billion in fresh FCNR-B deposits over time, according to bankers. They said higher interest rates and the Reserve Bank of India's decision to bear banks' hedging costs are expected to support deposit mobilisation.
Banks Increase Outreach To NRI Customers
Banks have intensified outreach efforts to raise awareness of the revised FCNR-B scheme among overseas depositors. Lenders are engaging more actively with NRI customers across key overseas markets to encourage participation.
ALSO READ: Everything NRIs Now Need To Know About FCNR(B) Deposits
Small finance banks are offering interest rates of up to 7.5% on FCNR-B deposits, while large banks are offering rates of up to 6.5%, according to the people.
Gulf Region Expected To Drive Inflows
Bankers expect the Gulf region to contribute a significant share of incremental FCNR-B deposits, driven by Indian expatriates living and working in the region.
The renewed interest in FCNR-B deposits follows the RBI's announcement in June that it would bear the hedging costs incurred by banks on FCNR-B deposits with maturities of three to five years. The measure is intended to encourage banks to raise more stable foreign currency deposits and support foreign exchange inflows.
ALSO READ: SBI, HDFC, Other Banks Raise FCNR-B Deposit Rates After RBI Support
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