Indian Banks Eye $6B Foreign Capital via NRI Deposits
By ThePip Desk
Bank of Baroda and Bank of India aim to raise over $6 billion in foreign capital, tapping into NRI funds with RBI’s support through dollar swaps and FCNR(B) deposits.
Bank of Baroda and Bank of India, two major public sector lenders, are collectively aiming to raise over $6 billion in foreign capital. This initiative is supported by the Reserve Bank of India, which provides forex risk cover through dollar swaps.
Major Banks’ Capital Targets
Bank of Baroda has set an ambitious target of $4 billion to $5 billion. The bank intends to achieve this through a combination of FCNR(B) deposits, medium-term notes in foreign currency, and overseas foreign currency bonds.
Bank of India, on the other hand, is focused on mobilizing $1.2 billion by the end of September. These efforts are part of a broader strategy to attract Non-Resident Indian (NRI) funds.
As of now, both banks have made significant progress:
- Bank of Baroda has already secured over $700 million via FCNR(B) deposits.
- It anticipates exceeding $1 billion by the close of the current month.
- Bank of India has mobilized $200 million through deposits.
How Banks Attract Foreign Capital
To attract foreign capital, Bank of India plans to offer competitive returns on these international deposits. These returns could be as high as 6.5%, aiming to rival other investment options available to NRIs.
The bank also intends to provide leverage up to nine times the initial customer deposits. Despite the attractive returns, these funds are expected to be margin accretive for the bank, costing 50 to 60 basis points less than bulk deposits.
Wider Banking Sector Participation
Across the Indian banking sector, the Reserve Bank of India has reported substantial success in these foreign capital raising efforts. Banks have collectively raised over $17 billion through FCNR(B) deposits up to the current week.
Several other public sector banks are also actively participating with their own targets:
- Punjab National Bank expects to raise approximately $2.5 billion in FCNR(B) deposits.
- Union Bank of India aims to mobilize up to $2.0 billion.
- Central Bank of India has set a target of $400 million.