The Reserve Bank of India (RBI) is allowing banks to offer leverage of up to 9 times on special foreign-currency deposits from non-resident Indians (NRIs), with guaranteed returns of more than 7.1%, as part of a broader effort to attract fresh forex inflows and stabilize the rupee amid the Middle East conflict, according to Business Today.
On Tuesday, the RBI cleared lenders to extend loans against foreign-currency deposits held by NRIs and to place a lien on those deposits, also permitting the issuance of letters of credit against the product, the report said. Banking officials indicated lenders may provide leverage running into double digits.
Alok Singh, head of treasury at Fairfax-backed CSB Bank Ltd, told Bloomberg: "We expect banks across the system to offer leverage of up to 9 times." He added that returns on deposits above 6% and leveraged rates above 10% are sufficient to attract significant dollar inflows.
RBI Policy and Forex Intervention Measures
The RBI also announced a buy-sell foreign exchange swap facility for eligible deposits, covering the principal amount but not the interest component, according to Business Today. These steps accompany a series of coordinated measures between the government and the central bank in recent weeks, including a concessional forex-swap facility to encourage overseas borrowings by state-owned companies and full hedging-cost support for banks raising deposits with maturities of three to five years until September 30.
Leverage and Returns: What NRIs Can Expect
| Metric | Rate/Value |
|---|---|
| Guaranteed deposit return | >7.1% on dollar deposits |
| Maximum leverage offered | Up to 9x |
| Estimated leveraged return | >10% |
| Potential total inflows | More than $80 billion (some bankers) |
| Additional inflows by Sept | $50 billion (estimated) |
| 2025-26 remittances | >$155 billion (Bloomberg) |
Impact on India's Forex Reserves and Rupee
The initiative is designed to strengthen foreign currency buffers as foreign fund outflows from domestic assets have dragged down the rupee. Business Today reported that some bankers estimate the program could bring in more than $80 billion. With India recording inward remittances of more than $155 billion in 2025-26, per Bloomberg, the additional inflows could push total annual inflows beyond $200 billion.
Comparison to 2013 Taper Tantrum
The strategy mirrors a mechanism deployed during the 2013 "taper tantrum," when Indian lenders mobilized about $34 billion to help arrest the rupee's decline, according to the report. The current effort is significantly larger in scale, reflecting the country's increased economic heft and a larger diaspora.
Diaspora Role and Shifting Remittance Sources
Authorities are counting on India's 35-million-strong diaspora to support the latest drive. Non-resident Indian remittances are already among the largest globally, and policymakers hope the combination of higher deposit rates and leverage options will encourage additional inflows at a time when capital inflows have moderated. Business Today noted that while Gulf Cooperation Council countries were once the dominant source of diaspora remittances, advanced economies now account for a larger share of money sent back to India.
The measures aim to provide a substantial cushion against external shocks, with the RBI's buy-sell swap and hedging support reducing the cost of capital for banks and making the product more attractive for overseas investors.
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