Backed by a global network and wealthy clientele, India’s foreign banks are flexing their muscle in attracting dollar deposits, despite their undersized presence in the local deposit market.
Foreign banks, which had barely $603 million in foreign currency non-resident bank deposits on 5 June when the central bank announced the concessional dollar swap window, managed to clock $8.97 billion by 30 July. A clutch of three foreign banks, HSBC, Standard Chartered Bank, and DBS Bank India, led the inflows.
Experts said that what worked in their favour is the availability of customers across the world and access to more dollars. For local banks, attracting such deposits would entail raising money in dollars and then lending to customers for deposits.
The surge is being driven by foreign banks’ superior access to dollar liquidity, said Abizer Diwanji, founder at NeoStrat Advisors LLP. Global have much larger funding lines and counterparty credit limits with overseas institutions, allowing them to mobilise dollars quickly whenever an opportunity arises, he said.
“Foreign banks have much larger limits with dollar deposit sources; so, they are able to raise much more,” he said. “Every bank which raises deposits needs to have a limit with their counterparty banks. If somebody is going to place an FCNR deposit with the SBI, they need to have limits with SBI to be able to lend to SBI.”
The scheme allows Indians living abroad to make leveraged and unlevered deposits at Indian banks in foreign currency, with the RBI taking the hedging risk to offer the potential for high returns. The scheme, announced on 5 June and rolled out three days later, will run till the end of September.
Among the biggest gainers, saw outstanding FCNR deposits jump from $120.26 million to $6.26 billion, while Standard Chartered Bank, which had no FCNR(B) deposits on June 5, had mobilized $1.86 billion by 30 July. DBS Bank India more than doubled its outstanding deposits to $613.55 million from $282.67 million over the same period.
On an outstanding basis—the total amount of deposits at a given point in time—private sector banks dominated the segment, with $25.7 billion in such deposits as of 30 July, up 72%, while public sector banks were close behind at $25.6 billion, a 53% increase over the period. Foreign lenders have narrowed the gap in just under two months, reflecting their ability to tap global dollar pools far more efficiently than domestic peers.
Foreign banks have traditionally not been big players in the deposit market in India, with their collective share at 4.8% in end-December 2025. In comparison, state-owned banks had a market share of 57.9%, while private banks had a 36.1% share. Although led by a handful of foreign banks, the inflows under FCNR show that they can step up where global presence and clientele matters.
The rupee hit a record low of 96.96 against the US dollar on 20 May, Bloomberg data showed, hurt by surging crude oil prices and economic stress following the US-Iran war that began on 28 February.
However, Diwanji of NeoStrat believes the current trend may not permanently alter the competition. “It’s only temporary,” he said, adding that only foreign banks with a branch presence in India can directly mobilise such deposits under the scheme.
A spokesperson for HSBC declined to comment. Emails sent to Standard Chartered Bank and DBS Bank India remained unanswered.
The RBI’s FCNR(B) facility, announced alongside temporary relaxations to attract foreign currency inflows and support the rupee, has triggered intense competition among banks to mobilise NRI deposits.
The key to such flows is the leverage. This structure allows customers to pledge a relatively small amount of their own capital and borrow the balance from the bank to create a much larger FCNR(B) deposit. For unlevered deposits, the customer puts only his/her own funds into the deposits.
Experts said that local banks have been more conservative than their foreign counterparts when it comes to leverage, offering about nine times leverage as compared to up to 19 times by British lender HSBC.
“Foreign banks realized that they have in addition to the benefit of RBI’s swap cover, their own dollar balance sheets outside of India. Therefore, they can leverage even more,” said Ashvin Parekh, managing partner of Ashvin Parekh Advisory Services LLP.
Parekh said only a handful of foreign banks in India have the scale—large balance sheets and branch networks—needed to mobilise deposits. “You have HSBC and Bank with such networks now that Citi has sold off its retail business in India.”
“Personally, I believe that on account of these geopolitical tensions, NRIs in West Asia are uncertain whether they should keep their wealth back there or at least put it in FCNR(B) deposits and bring it home,” said Parekh, who expects over $70 billion inflows under various RBI incentive schemes.
These schemes include external commercial (ECBs) and overseas foreign currency borrowing, both available till the end of 2026. On 5 August, RBI governor Sanjay Malhotra said that the central bank has no immediate plans to prematurely close or extend the FCNR(B) deposit window before its 30 September deadline.