Neutral impactEconomy
80% of FCNR (B) inflows came via the leverage route
BusinessLine 1 hr ago·4 Sept 2026, 3:13 pm
Foreign Currency Non-Resident (Banks) (FCNR (B)) deposits are a key source of foreign capital for the Indian banking sector. Recently, a significant portion of these inflows has come through the leverage route, meaning investors are borrowing heavily against their existing deposits to increase their exposure. This trend is driven by the high interest rate differentials between India and other major economies, making the country an attractive destination for yield-seeking funds.
This surge in leveraged inflows is a double-edged sword for investors. On one hand, it provides the banking system with substantial liquidity, which can help fund domestic credit growth. On the other hand, it introduces heightened risk. If global interest rates rise or the Indian rupee weakens, the cost of servicing these leveraged positions could increase rapidly, potentially leading to a sudden reversal of capital flows.
Excerpt from BusinessLine
According to bankers’ estimates, about 80 per cent of the total $127.23 billion mobilised by Non-Resident Indians (NRIs) under the special Foreign Currency Non-Resident (Bank) FCNR(B) deposits offered by banks through the RBI’s limited-period concessional swap facility came through the leverage route, while more than…Read the original at BusinessLine
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