RBI Allows Banks to Mobilise FCNR(B) Deposits Through GIFT City Branches

The Reserve Bank of India (RBI) has permitted Indian banks to mobilise Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits through their branches operating in Gujarat International Finance Tec-City (GIFT City). The move follows the RBI’s recent special dispensation under which it agreed to bear the hedging costs on incremental FCNR(B) deposits, enabling banks to offer significantly higher returns on such deposits.

Following the regulatory clarification, the State Bank of India (SBI) became one of the first banks to launch an FCNR(B) deposit offering through its GIFT City branch. Under the scheme, SBI is providing leverage facilities of up to nine times the deposit amount for Non-Resident Indians (NRIs) and high-net-worth individuals (HNIs). The bank is offering interest rates of 5.50% for three-year deposits, 5.75% for four-year deposits and 6% for five-year deposits, while overall market offerings under the RBI dispensation can reach up to 7.1%.

Banks had sought clarity on whether their GIFT City branches, which function as Offshore Banking Units (OBUs), could participate in FCNR(B) deposit mobilisation. Industry participants argued that these units operate as offshore entities and should therefore be allowed to access non-resident deposits. The RBI’s approval is expected to benefit banks with limited overseas presence by allowing them to leverage GIFT City’s tax-neutral international financial centre status to attract foreign currency deposits.

The RBI has allowed banks to route and mobilise FCNR(B) deposits through their GIFT City branches. The clarification enables Offshore Banking Units to participate in attracting NRI and HNI deposits and expands the scope of foreign currency deposit mobilisation beyond banks having extensive overseas branch networks.

The regulatory move complements the RBI’s recent decision to bear hedging costs on incremental FCNR(B) deposits, thereby improving returns available to depositors. SBI has already introduced its “Advantage FCNR(B) Deposit Scheme” through its GIFT City branch, offering leverage facilities and allowing customers to obtain funding against their deposits. The development is expected to encourage wider participation by banks and strengthen GIFT City’s role as an international financial hub.