Of the 33 banks operating in GIFT City, which is India’s only International Financial Services Centre (IFSC), 18 are Indian, with 10 being private sector banks (PvBs) and eight public sector banks (PSBs).
Small and mid-sized private sector banks, which neither have overseas branches nor a GIFT City presence, do not want to be left out of the leverage opportunity when it comes to mobilising fresh Foreign Currency Non-Resident (Bank) or FCNR (B) deposits under the RBI’s limited period concessional swap window.These banks are exploring tie-ups with large Indian banks that have a presence in GIFT City so that their non-resident Indian (NRI) customers can get the benefit from leverage and place higher amounts as fresh FCNR (B) deposits with a tenor of 3-5 years with them.If the tie-ups fructify, small and mid-sized private sector banks can issue stand-by letters of credit (SBLCs) to their NRI customers. Based on the strength of the SBLCs, customers can obtain loans from large Indian banks through their international banking units (IBUs) in GIFT City (Gujarat International Finance Tec-City). The loan proceeds can then be channelised as fresh FCNR (B) deposits with the issuing bank.Of the 33 banks operating in GIFT City, which is India’s only International Financial Services Centre (IFSC), 18 are Indian, with 10 being private sector banks (PvBs) and eight public sector banks (PSBs).Overall, there are 21 PvBs and 11 small finance banks (SFBs) in the country. Several small and mid-sized PvBs along with some SFBs, that do not have a GIFT City presence are considering tie-ups with Indian banks operating in the IFSC.As things stand, small and mid-sized PvBs are offering higher interest rates in the 7-7.50 per cent range on fresh FCNR (B) deposits to offset the limitations they face in providing leverage to their NRI customers.Providing leverageLarge banks such as State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, Punjab National Bank and Bank of Baroda, which do not face such constraints in providing leverage to their NRI customers, are quoting lower interest rates of around 6 per cent.PN Vasudevan, MD & CEO, Equitas SFB, said: “We have initiated discussions with several banks operating in GIFT City as well as a few foreign banks. Our teams have visited GIFT City and are currently meeting banks in West Asia to explore possible arrangements.“However, discussions are still at a very early stage and no agreements have been finalised. We are exploring every possible avenue, but there is no certainty that these discussions will translate into commercial arrangements.”The chief of a PvB observed that GIFT City primarily functions as a funding centre. Therefore, the first priority of banks operating there is to meet the funding requirements of their own customers.“Only after satisfying internal demand would the IBUs consider extending funding to the customers of other banks. Discussions with the banks there are ongoing,” he said.According to industry estimates, banks are expected to mobilise about $30-50 billion through fresh FCNR (B) deposits by the end of September 2026 under RBI’s limited period measures aimed at boosting dollar liquidity in the banking system and help in stabilising the rupee.The RBI will bear the full hedging cost for banks raising fresh FCNR (B) deposits with a tenor of three to five years. It has also exempted these deposits from statutory pre-emptions such as the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR).Published on July 22, 2026
