The scheme allows customers to borrow up to 12 times their deposit amount and offers indicative effective annual returns of up to 16.2%, depending on the investment size and tenure, according to offer documents accessed by ET.
Under the FCNR(B) Special Opportunity Deposit with Structured Loan Facility, the bank is offering dollar deposit rates of up to 6.60% for deposits above $5 million with maturities of three to five years.
The associated loan carries an indicative interest rate of 5.80%-5.90% per annum, with interest payable semi-annually and principal repayable at maturity. The loan is co-terminus with the FCNR(B) deposit, an illustrative example by the lender showed.’
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The product follows the Reserve Bank of India (RBI) decision to temporarily relax interest rate ceilings on fresh FCNR(B) and NRE deposits for a three-to-five-year tenure and provide banks with a concessional dollar-rupee swap window until September 30, 2026. Under the swap facility, the RBI absorbs the currency hedging cost, enabling banks to offer higher deposit rates while keeping borrowing costs lower.
Banks have since been competing aggressively with increasingly leveraged structures designed to give better returns for NRIs.Macros strong, but weak rains, war can hit growth: RBI Guv Sanjay Malhotra
HSBC‘s IFSC Banking Unit in GIFT City is offering the highest leverage in the market, allowing customers to borrow up to 19 times their own contribution, while State Bank of India offers a leverage of around nine times.
The products seek to capture the spread between FCNR(B) deposit rates, which are currently above 6% for longer tenors under the RBI window, and lower loan costs, generating double-digit returns on investors’ equity.