The Reserve Bank of India (RBI) has allowed Indian banks to use their branches in GIFT city to mobilise Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits and offer leverage for such deposits.

According to sources, State Bank of India (SBI) is expected to be among the first lenders to launch the offering through its GIFT City branch in Ahmedabad.

“We are launching our FCNR(B) deposits from the GIFT City branch. We are offering leverage of up to nine times the deposit amount held by NRIs and high-net-worth individuals (HNIs),” a senior SBI official said.

India’s largest lender, SBI, has a network of 244 international offices across 29 countries. Currently, it offers loans against FCNR(B) deposits maintained at its India branches through its GIFT City unit.

The RBI’s move is expected to encourage more banks to route FCNR(B) schemes through their GIFT City branches. As a tax-neutral international financial centre, GIFT City provides a platform for lenders with limited or no overseas branch presence to tap non-resident deposits.

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Earlier this month, the RBI announced a special dispensation under which it would bear the cost of hedging incremental FCNR(B) deposits. The move has allowed banks to offer interest rates of up to 7.1% on such deposits, making returns broadly comparable with domestic term deposits.

Banks had sought clarity from the regulator on whether their GIFT City branches, which operate as offshore banking units, could participate in the scheme. Industry executives argued that these units function as foreign entities and should be permitted to mobilise FCNR(B) deposits.

Apart from SBI, only a few lenders, including Bank of India, Bank of Baroda and ICICI Bank, have a significant overseas presence. Smaller banks had urged the regulator to allow GIFT City branches to access NRI and HNI deposits.

SBI’s “Advantage FCNR(B) Deposit Scheme” also offers a leverage facility. Given its large overseas balance sheet, the bank is expected to deploy a sizeable portion of its foreign currency liquidity through these deposits. The scheme also allows customers to raise funding from overseas lenders against their deposits.

Under the scheme, SBI is offering interest rates of 5.50% on three-year deposits, 5.75% on four-year deposits and 6% on five-year deposits.