State Bank of India leads foreign currency deposit mobilisation among Indian lenders
State lenders have rapidly accumulated overseas funds to support leveraged deposit products for non-resident Indians, signaling a strategic shift in how Indian banks fund their international operations.
State Bank of India has mobilised $1.9 billion in foreign-currency resources, dominating a broader push by Indian public-sector banks to attract overseas capital. Total mobilisation by state lenders reached just under $3 billion as of last Friday, according to figures recently shared with the finance ministry.
Bank of Baroda ranked second with $273 million raised, while Canara Bank and Punjab National Bank each secured $80 million. These inflows follow a directive from Finance Minister Nirmala Sitharaman earlier this week, urging public-sector banks to deepen engagement with the Indian diaspora through innovative deposit products.
Bank executives indicated to the ministry that their immediate priority is securing baseline foreign-currency resources. This foundation is intended to provide greater flexibility in structuring leveraged offerings tailored for high-net-worth non-resident Indian clients.
Inflows have accelerated as lenders introduce these leveraged schemes to attract Foreign Currency Non-Resident (Bank) deposits, or FCNR(B). Under current structures, banks are charging approximately 5.8 percent on $9 million loan facilities while offering around 6.5 percent on FCNR(B) deposits, provided customers commit $1 million of their own funds.
The Reserve Bank of India unveiled the underlying scheme in early June, prompting a rush among domestic lenders to raise foreign capital. However, this initial surge drove up overall funding costs, which has subsequently tempered the pace at which banks can roll out new leveraged deposit products.
State Bank of India, operating more than 240 overseas offices across 29 countries, was among the first to tap overseas bond markets following the scheme's announcement. The bank utilizes a mix of bond issuances and FCNR(B) deposits swapped with the central bank to fund these operations.
Private-sector lenders are also capitalising on the regulatory window. HDFC Bank and Axis Bank have raised $750 million and $800 million, respectively, through bond issuances via their International Financial Services Centre Banking Units in GIFT City.
The proceeds from these private placements are explicitly earmarked to provide leverage against deposits raised from non-resident customers. This coordinated push highlights a competitive race among Indian lenders to capture diaspora wealth, even as rising borrowing costs impose constraints on the profitability of these leveraged structures.
