FCNR(B) Deposits Attract Gulf NRIs, Shifting Investment Trends
Infographic: FCNR(B) Deposits Now Preferred by Gulf NRIs, Diverting Capital
Key Highlights
Gulf NRIs are favoring FCNR(B) deposits for guaranteed dollar returns, diverting significant capital from India-focused investment funds. Explore the impact.
Foreign Non-Resident (Bank) or FCNR(B) deposits, offered by the Reserve Bank of India (RBI), have emerged as the primary investment choice for Gulf-based Non-Resident Indians (NRIs).
This shift significantly diverts capital that would typically flow into India-focused funds and other alternative investment products, primarily due to the deposits’ appealing guaranteed dollar returns.
Key Capital Diversion Metrics
Industry estimates highlight the substantial scale of this capital redirection, impacting fundraising efforts for India-focused funds.
- Between 60% and 80% of capital from Gulf NRIs, typically aimed at India-focused funds, is now directed towards FCNR(B) deposits.
- Amit Goenka, Chairman and Managing Director of Nisus Finance, noted that 75% to 100% of intended allocations for credit funds targeting NRI investors are now going into these deposits.
- Nisus Finance, which aimed to raise $300 million offshore, primarily from the UAE, has seen NRI demand drop by 60-70% compared to initial expectations.
- Prateek Pant, Market Head for Middle East and Africa at ASK Private Wealth, observed that approximately 70% of expected inflows across various investment strategies are now materializing in FCNR(B) deposits.
Understanding the FCNR(B) Advantage
The FCNR(B) scheme offers several compelling benefits that make it highly attractive to Gulf NRIs and family offices.
These deposits provide tax-free dollar yields, which investors can further enhance through leverage, making them a