RBI & Policy · Daily brief
A hedging cost subsidy from the RBI let State Bank of India offer up to 7.5% dollar deposit rates backed by 9x leverage, drawing $1.5 billion in global capital.
State Bank of India has attracted $1.5 billion from the global market through FCNR (Foreign Currency Non-Resident) deposits, according to a LinkedIn analysis of the mechanics behind the inflow.
The trigger was an RBI policy introduced last month that subsidised hedging costs for banks collecting fresh FCNR deposits. SBI used this regulatory opening to design a leveraged deposit programme.
The bank offered non-resident depositors interest rates of up to 7.5% on US dollars, paired with 9x leverage. A depositor could put down a fraction of their own funds, borrow the rest at low global rates, and deposit the full sum at 7.5%, capturing the interest rate spread as low-risk profit.
By subsidising the hedge, the RBI enabled SBI to pull in global capital at scale, adding to India's forex reserves without putting pressure on domestic rupee liquidity.
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