economy · 2026-09-06
RBI's Dollar Rush: $60B in Just 10 Days
Photo: Vyacheslav Argenberg / Wikimedia (CC BY 4.0)
Banks raised $60 billion, nearly half of the RBI's entire $136 billion dollar deposit scheme, in the last 10 days before it shut a month early, because the scheme offered NRIs a subsidised, near risk-free trade whose hedging cost now falls on the RBI and eventually the taxpayer.
How does this NRI deposit scheme actually work?
NRIs park dollars in Indian banks for 3-5 years as FCNR(B) deposits, earning dollar-denominated interest while their money stays protected from rupee depreciation. Normally banks would have to buy costly insurance against currency swings to use these dollars in India. Instead, until September 30, the RBI itself took on that currency risk for free, letting banks pass NRIs unusually attractive rates without banks bearing the hedging cost.
Why did some banks grab far more dollars than their size implies?
Mobilisation was less about branch networks and more about balance-sheet muscle: ICICI Bank funded over 70% of its $17.88 billion haul through its own overseas lending and standby letters of credit, while foreign banks jumped from a 1-2% share in June to 15-30% of incremental flows by July-end, showing scale abroad mattered more than domestic deposit franchise.
How risk-free is this trade really for the NRIs taking it?
In the 2013 version, NRIs could borrow up to 9x their own money overseas at low rates, place it all in FCNR deposits, and pocket the spread with the RBI's swap absorbing currency risk, turning a $100,000 deposit into 12-22% dollar returns. Whether 2026's version repeats that scale of leverage-driven gain depends on how wide the rate spread between US and Indian yields stays.
Why did RBI shut it early despite the rush?
RBI had already collected $127.2 billion, nearly matching the $136 billion balance-of-payments gap the scheme was meant to help close, so the money had done its job a month ahead of schedule. Every extra dollar meant RBI absorbing more of the foreign-exchange hedging cost itself, a bill that eventually lands on the taxpayer. Closing early capped that growing liability while reserves were already at a record $729 billion.
Why did some banks grab far more dollars than their size implies?
Mobilisation was less about branch networks and more about balance-sheet muscle: ICICI Bank funded over 70% of its $17.88 billion haul through its own overseas lending and standby letters of credit, while foreign banks jumped from a 1-2% share in June to 15-30% of incremental flows by July-end, showing scale abroad mattered more than domestic deposit franchise.
How risk-free is this trade really for the NRIs taking it?
In the 2013 version, NRIs could borrow up to 9x their own money overseas at low rates, place it all in FCNR deposits, and pocket the spread with the RBI's swap absorbing currency risk, turning a $100,000 deposit into 12-22% dollar returns. Whether 2026's version repeats that scale of leverage-driven gain depends on how wide the rate spread between US and Indian yields stays.
Source: businesstoday.in