India's central bank allowed lenders to extend loans against foreign-currency deposits raised under a special program offered to overseas citizens, a move that could see billions in dollar inflows over the next few months.
Banks could offer leverage that may run into double digits, officials said, as India taps its 35-million-strong diaspora for support to shore up foreign currency buffers amid the US-Iran war. Lenders are offering guaranteed returns of more than 7.1% on dollar deposits, with banks opting for social media promotions and advertisements to attract inflows, which some bankers say may top $80 billion.
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“We expect banks across the system to offer leverage of up to 9 times,” said Alok Singh, head of treasury at Fairfax-backed CSB Bank Ltd., adding that returns on deposits above 6% and leveraged rates above 10% are enough to attract a significant amount of dollar inflows to the country.
In a statement Tuesday, the Reserve Bank of India said banks may lend to overseas residents with foreign-currency deposits and mark a lien on them. The authority also clarified that lenders can issue letters of credit against this product.
In recent weeks, Indian authorities have gone all-out to draw inflows into the country as the foreign fund exodus from local assets weighed on the rupee. Both the government and the central bank unveiled synchronized steps, including a concessional forex-swap facility to encourage overseas borrowings by state-owned companies and full hedging-cost support for banks raising 3- to 5-year deposits until Sept. 30.
The central bank also said it will provide a buy-sell foreign-exchange swap for eligible deposits, covering the principal amount, and not the interest component.
These measures, especially the drive to raise money from the diaspora, revived a playbook last used by lenders during the 2013 taper tantrum, when India mobilized about $34 billion to stem the rupee's decline.
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Remittances from non-resident Indians already rank among the world's largest, and the authorities are betting that higher deposit rates and the leverage offered can lure money at a time when capital inflows have slowed.
India saw inward remittances top $155 billion in 2025-26. Adding another estimated $50 billion from this program until September, the country is potentially looking at inflows of at least $200 billion this year. While the Gulf Cooperation Council countries were once the primary source of diaspora money, advanced economies now contribute more.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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