How Indian Banks Gifted Wealthy NRIs Risk-Free Double-Digit Dollar Fortunes While Ordinary Savers Carry the Currency Risk

In an eye-opening financial arrangement, commercial banks funded nearly 80% of the massive $127.23 billion gathered under the RBI's special 85-day FCNR(B) deposit window between June 8 and August 31. Rather than overseas Indians bringing in genuine personal savings, banks directly lent them money on the condition that the borrowed cash be immediately pumped back into high-yielding dollar deposits offering 6 to 7.5% interest. By routing these loans through International Banking Units in GIFT City to skip expensive bank guarantee charges, lenders offered credit lines up to nine times - and in some British banks, up to nineteen times - an investor's own money, with more than two-thirds of the entire deposit pool locked into the maximum five-year tenor.

ICICI Bank topped the tally by mopping up $17.88 billion, followed by HSBC with $14.5 billion, HDFC Bank with $12 billion, State Bank of India with $10 billion, Standard Chartered with $5 billion, IDFC First Bank with $3.57 billion, and RBL Bank with $3.4 billion. As banking expert V. Viswanathan explained, an NRI putting down just $100,000 of their own money could borrow $900,000 from the bank at 5.4% and park the full $1,000,000 into a 6% deposit. While the original $100,000 earned $6,000, the borrowed $900,000 generated an extra $5,400 interest spread - delivering an effortless $11,400 total profit that converted a standard deposit into an 11.4% return in pure US dollars. Due to strict US tax scrutiny under FATCA, the vast majority of these leveraged funds came from non-US pockets across West Asia, Europe, and parts of Africa.

This setup exposes an alarming disparity in how resident Indians are treated compared to affluent non-residents. While ordinary domestic citizens earn barely 6.5 to 7% on taxable fixed deposits in a depreciating rupee, Indian banks effectively used their own money to guarantee double-digit dollar riches for overseas clients. If the rupee weakens further against the dollar over the five-year lock-in period, wealthy overseas investors will still walk away with their guaranteed dollar fortunes, while the currency depreciation losses will ultimately be absorbed by the central bank's foreign exchange reserves and domestic taxpayers.