The UAE accounts for nearly half of FCNR-B funds mobilised through the RBI’s dedicated facility, while US and UK demand remains subdued.
Banks including HSBC and SBI are using GIFT City to offer leveraged FCNR-B products, with leverage reaching up to 19X.
Total FCNR-B balances surged from $32.56 billion on June 5 to $60.55 billion by July 30 after RBI incentives boosted the attractiveness of three- and five-year deposits.
The United Arab Emirates (UAE) is emerging as the biggest source of fresh foreign currency non-resident bank (FCNR-B) deposits for Indian lenders, with banks increasingly using their Gujarat International Finance-Tec City (GIFT City) branches to tap overseas investors.
Inflows from the US and UK, meanwhile, remain relatively subdued, reports said.
1 August 2026
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The UAE accounts for nearly half of the FCNR-B funds mobilised through the Reserve Bank of India's dedicated facility, according to public data. The tax treatment of such deposits is one factor supporting demand.
India does not levy tax on FCNR-B interest, while the UAE does not tax investment gains. Interest earned by US-based investors, however, is subject to personal income tax in the US.
GIFT City Drives Deposit Push
Indian banks are increasingly using their GIFT City operations to market FCNR-B deposits and related products to overseas customers.
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HSBC's GIFT City branch offers non-resident Indian clients leverage of up to 19 times their FCNR-B placements. State Bank of India (SBI), meanwhile, offers leverage of up to nine times. Other lenders, including Central Bank of India, are also using their offshore units to attract deposits.
GIFT City has consequently become an important channel for banks seeking to tap dollar liquidity from overseas Indians, particularly those based in the Gulf.
Public Banks Take Lead
State-owned lenders currently have a slight edge over private banks in FCNR-B mobilisation.
SBI, Bank of Baroda, Canara Bank and Punjab National Bank together had an FCNR-B portfolio of nearly $21 billion as of July 30, according to government data.
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The four largest private-sector banks had accumulated around $18.5 billion during the same period. SBI was the biggest individual domestic lender, with deposits of roughly $6 billion. The bank has set a target of at least $10 billion by the end of September.
Overall, FCNR-B balances across Indian banks nearly doubled from $32.56 billion on June 5 to $60.55 billion on July 30.
The sharp increase followed RBI measures announced on June 5 to encourage foreign currency inflows. The central bank offered hedging-cost support for new three- and five-year FCNR-B deposits and exempted such fresh deposits from cash reserve ratio and statutory liquidity ratio requirements.
These measures have significantly improved the attractiveness of FCNR-B deposits, with Gulf-based investors emerging as the strongest source of demand.
