Finance Minister Nirmala Sitharaman on Monday asked banks to enhance outreach to NRIs and introduce "innovative deposit products" to sustain the momentum of foreign currency deposits, according to a finance ministry statement reported by Business-Today.
Background: Finance Minister's Directive
Sitharaman met representatives of public sector banks and public financial institutions along with senior officials from the finance ministry as she reviewed the Foreign Currency Non-Resident (Bank) [FCNR(B)], External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) swap initiatives, Business-Today reported. The finance ministry statement noted: "FM appreciated the encouraging and enthusiastic initial response and called upon banks to further intensify outreach to the NRI diaspora, introduce innovative deposit products and sustain the momentum of mobilisation during the remaining period of the schemes."
The directive targets sustaining inflows through key foreign currency instruments that have direct implications for India's external financing and trade finance cost of capital.
Bankers' Response and NRI Interest
Bankers reported significant interest from NRIs residing in Singapore, Hong Kong, West Asia, the UK and the US, as they are offering attractive returns on the FCNR(B) deposits, including on five-year deposits, supported by the suspension of the interest rate ceiling on fresh FCNR(B) deposits under the scheme, according to Business-Today.
| Region | NRI Interest Level | Key Deposit Feature |
|---|---|---|
| Singapore | High | Competitive returns on 5-year FCNR(B) deposits |
| Hong Kong | High | Suspension of interest rate ceiling |
| West Asia | High | Attractive returns supported by policy |
| UK | High | Momentum in mobilisation |
| US | High | Innovative deposit products under review |
Implications for Trade Finance and Capital Flows
For CFOs and treasury directors, the sustained inflow of foreign currency deposits — particularly through FCNR(B) schemes — strengthens India's foreign exchange reserves and reduces the cost of hedging for trade finance operations. The suspension of interest rate ceilings allows banks to offer more competitive rates, potentially lowering the cost of capital for external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) used by Indian corporates.
The directive also signals government commitment to stabilising external financing amid global monetary tightening. Treasury professionals tracking emerging market capital flows should monitor FCNR(B) mobilisation data as a leading indicator of India's balance of payments strength. The focus on innovative deposit products suggests banks may introduce structured instruments linked to trade finance needs, such as pre-export finance or supplier credit facilities.
Investors and economic analysts should note that sustained foreign currency deposits help insulate India from sudden stop risks, lowering sovereign credit spreads and improving the operating environment for export-oriented businesses. The explicit mention of NRIs in Singapore, Hong Kong, West Asia, the UK and the US indicates targeted marketing efforts that could shape the composition of India's external liabilities.
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