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India’s push to strengthen GIFT City as an international financial hub has received a fresh boost, with the Reserve Bank of India (RBI) allowing banks to mobilise Foreign Currency Non-Resident (Bank) or FCNR(B) deposits through their GIFT City branches.

The move is expected to widen access to non-resident deposits, particularly for banks with limited overseas presence, while also creating new funding opportunities for high-net-worth individuals (HNIs) and non-resident Indians (NRIs).

GIFT City Gets a Bigger Role in NRI Banking

Under the new framework, Indian banks can use their International Financial Services Centre (IFSC) banking units in GIFT City to mobilise FCNR(B) deposits and offer leverage facilities linked to those deposits, reported Financial Express.

The development marks another step in the RBI’s efforts to deepen the role of GIFT City as a global financial services centre and create alternative channels for foreign currency mobilisation.

According to the report, State Bank of India (SBI) is likely to be among the first lenders to operationalise the facility through its GIFT City branch in Ahmedabad.

“We are launching our FCNR(B) deposits from the GIFT City branch. We are offering leverage of up to nine times the deposit amount held by NRIs and high-net-worth individuals (HNIs),” the report noted citing a senior SBI official.

SBI’s New FCNR(B) Offering

India’s largest lender appears set to take an early lead in the segment.

SBI, which operates 244 international offices across 29 countries, already offers loans against FCNR(B) deposits maintained at its India branches through its GIFT City unit. The latest regulatory clarity now allows the bank to expand the offering further.

Under its “Advantage FCNR(B) Deposit Scheme”, SBI will provide a leverage facility that allows deposit holders to access additional funding against their deposits.

The scheme also enables customers to raise financing from overseas lenders using these deposits as collateral.

Attractive Returns for NRIs

The RBI’s decision comes shortly after the central bank announced a special dispensation under which it would absorb the cost of hedging incremental FCNR(B) deposits.

The move has enabled banks to offer significantly more attractive returns on foreign currency deposits.

Under SBI’s scheme, interest rates are being offered at:

5.50 per cent for three-year deposits
5.75 per cent for four-year deposits
6 per cent for five-year deposits

Industry participants note that banks are now able to offer rates of up to 7.1 per cent on certain FCNR(B) deposits, bringing returns broadly in line with domestic fixed deposits.

Why Smaller Banks Were Seeking Clarity

The RBI’s clarification is particularly significant for banks that do not have a large overseas footprint.

Until now, only a handful of lenders, including SBI, Bank of Baroda, Bank of India and ICICI Bank, had substantial international operations that allowed them to access foreign currency deposits directly from NRIs.

Smaller lenders had argued that their GIFT City branches function as offshore banking units and should therefore be allowed to mobilise FCNR(B) deposits in the same manner as overseas branches.

Industry executives had sought regulatory clarity on this issue, maintaining that the offshore status of GIFT City banking units made them suitable platforms for such deposits.

Boost for GIFT City’s Financial Ambitions

The latest RBI move is expected to encourage more lenders to route FCNR(B) schemes through their GIFT City operations.

As a tax-neutral international financial centre, GIFT City offers banks an opportunity to attract foreign currency deposits without building extensive overseas branch networks.

For policymakers, the decision aligns with broader efforts to position GIFT City as a competitive global financial hub capable of attracting international capital and servicing cross-border banking requirements.

What It Means for Banks and Depositors

For banks, the framework opens up an additional avenue to mobilise foreign currency resources and diversify funding sources.

For NRIs and HNIs, it creates access to foreign currency deposit products with potentially attractive returns, leverage facilities and broader financing options.

With SBI preparing to roll out the offering and other lenders expected to follow, the RBI’s latest move could accelerate the development of GIFT City as a key gateway for international banking and non-resident investment flows into India.