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India is turning to its vast overseas community to attract more foreign currency inflows as the country seeks to strengthen its foreign exchange reserves and manage pressure on the rupee, Bloomberg News reported on Tuesday, citing a government statement.
The government has asked state-run banks to intensify efforts to mobilise deposits from the 35-million-strong Indian diaspora, encouraging lenders to expand outreach programmes, improve digital engagement and introduce innovative deposit products, the report said.
According to the report, Finance Minister Nirmala Sitharaman, during a meeting with executives of state-owned banks on Monday, directed lenders to focus on attracting more non-resident Indian (NRI) deposits as part of efforts to improve India’s external position.
The move comes amid concerns over the rupee’s weakness and the need to maintain adequate foreign exchange buffers at a time when global uncertainties, geopolitical tensions and volatile commodity markets are weighing on emerging market currencies.
RBI steps up measures to attract foreign currency deposits
The Reserve Bank of India (RBI) has already introduced measures to encourage banks to raise more foreign currency deposits from NRIs.
In June, the central bank extended full hedging-cost support for banks raising foreign currency deposits with maturities of three to five years and allowed lenders to borrow against these funds.
The move has enabled banks to offer higher returns to overseas depositors, with some lenders offering interest rates of up to 7.5 per cent.
Bankers and analysts expect the scheme could help attract around $50 billion in foreign currency inflows, providing support to India’s forex reserves.
The latest initiative mirrors India’s response during the 2013 “taper tantrum”, when the country launched a special deposit scheme to attract overseas funds and managed to raise around $34 billion to ease pressure on the rupee.
RBI governor to meet bank chiefs
The push to attract more overseas deposits is expected to gain further momentum as RBI Governor Sanjay Malhotra is scheduled to meet chief executives of public and private sector banks to discuss ways to increase foreign currency inflows and address operational challenges, Bloomberg News reported.
The discussions come as policymakers seek to strengthen India’s external buffers amid pressure on domestic assets, including the rupee.
The ongoing conflict in West Asia has added to concerns over global energy prices and financial market volatility, posing additional challenges for countries such as India that rely heavily on crude oil imports.
Banks look at diaspora markets and GIFT City
State-owned banks have reported growing interest from overseas Indians following the introduction of attractive deposit rates.
According to the reports, Indians living in Singapore, Hong Kong, the Middle East, the United Kingdom, the United States and other overseas markets have shown strong interest in the deposit programme, bank executives told the finance minister.
Sitharaman also asked state-run lenders to make greater use of the banking infrastructure available at Gujarat International Finance Tec-City (GIFT City) to attract overseas funds, the report said.
Diaspora remains a key source of foreign inflows
India’s diaspora has historically been an important source of foreign currency through remittances and deposits. The country received more than $100 billion in remittances in recent years, making it one of the world’s largest recipients of overseas transfers.
The government’s latest push aims to channel a larger share of overseas savings into the banking system, helping lenders access stable foreign currency resources while supporting India’s external account.
With global risks remaining elevated and currency markets facing continued volatility, policymakers are betting on diaspora savings as a reliable source of dollar inflows to reinforce India’s financial stability.
