Citigroup & Axis Bank Boost India Dollar Deposits
By Business Desk
Citigroup and Axis Bank partner to offer financing for NRIs investing in dollar deposits, aiming to increase India’s foreign currency inflows and strengthen reserves.
Citigroup Inc. and Axis Bank Ltd. have forged a partnership to facilitate financing for non-resident Indians (NRIs) looking to invest in foreign-currency deposits with Axis Bank.
This collaboration establishes a leveraged cross-border trade, designed to multiply dollar inflows from the Indian diaspora.
How Leveraged Deposits Work
Axis Bank issues standby letters of credit to underpin the financing. This supports the financing extended by Citigroup through its offshore operations.
The arrangement allows for leverage on the amount invested by NRIs. The Reserve Bank of India (RBI) introduced a concessional swap facility in June, encouraging these deposits and permitting lenders to issue standby letters of credit against them.
The RBI’s initiative has seen considerable success, attracting substantial foreign currency. This strategy forms part of the RBI’s broader efforts to bolster foreign-exchange reserves and alleviate pressure on the Indian rupee.
Key Deposit Program Figures
Deposits under the facility have surged past $52 billion. The central bank concluded the incentive a month earlier than its initial September 30 deadline, now ending in August.
Axis Bank currently offers attractive rates of up to 6.40% on Foreign Currency Non-Resident (FCNR) deposits.
The arrangement also opens avenues for foreign banks possessing extensive offshore private-banking networks to offer financing, even without a retail presence in India.
Citigroup’s involvement strictly pertains to institutional clients, underscoring that this does not signify a return to the Indian retail banking sector, which it divested to Axis Bank in 2022.