Neutral impactForex
Banks offer up to 29x leverage to amplify NRI returns on FCNR deposits
Economic Times 9 hrs ago·15 Aug 2026, 12:15 am
Banks are now offering Non-Resident Indians (NRIs) a unique structure to boost returns on Foreign Currency Non-Resident (Bank) (FCNR(B)) deposits. This involves the investor contributing a portion of the capital and borrowing the remaining amount in foreign currency against the deposit. The borrowed funds are then also invested in FCNR(B) deposits. The investor earns interest on the total larger deposit while paying interest only on the borrowed portion.
This strategy can amplify returns significantly, as the investor profits from the difference between the higher interest earned on the total deposit and the lower interest paid on the loan. This creates a leveraged position, meaning the investor's exposure to currency fluctuations and interest rate movements is much higher than their actual cash contribution.
Investors should carefully evaluate the net benefit after accounting for the cost of borrowing and the associated risks. While this can enhance yields, it also introduces complexity and potential volatility. It is crucial to understand the terms of the loan and the bank's policies before committing to such a structure.
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- Category: Forex.
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