₹5 lakh crore profit, not loss? SBI Research’s case for FCNR(B) scheme explained
The FCNR(B) scheme mobilised $127 billion in less than three months, with SBI Research estimating significant potential benefits for banks from the resulting liquidity and credit creation.
- Sep 20, 2026,
- Updated Sep 20, 2026 5:35 AM IST
The Foreign Currency Non-Resident (Bank) or FCNR(B) deposit scheme mobilised $127 billion in less than three months, but its costs have since become a point of debate. In its September 18 Ecowrap, SBI Research argued that estimates portraying the scheme as a ₹5 lakh crore loss overlook the benefits to banks and the Reserve Bank of India (RBI).
According to SBI Research, the calculation of a ₹5 lakh crore cost effectively counts the same foreign-exchange exposure twice. The report says the estimate combines around ₹1.75 lakh crore of additional interest costs with approximately ₹3.18 lakh crore of foreign-exchange depreciation costs, based on an assumed 5% annual depreciation of the rupee over five years.
SBI Research argues that the FCNR(B) deposits were supported by a special USD-INR swap facility designed to hedge the associated exchange-rate risk. Once the principal has been hedged, the report says, a subsequent depreciation of the rupee should not be treated as another contractual loss for banks or the RBI. It therefore describes adding the depreciation estimate to the hedging cost as double-counting the same exposure.
How SBI Research arrives at ₹5 lakh crore
The report estimates that the $127 billion mobilisation could generate additional credit for banks through the credit multiplier. Using a time-lagged multiplier of around 2.5, SBI Research estimates that the deposits could potentially support about ₹25 lakh crore in additional credit.
It assumes an effective yield of around 7.5% on this additional credit. Against this, interest outgo on ₹12 lakh crore at 6.5% is estimated at ₹75,000 crore. SBI Research says this could result in an effective net interest margin of around ₹1 lakh crore per year, translating into a notional ₹5 lakh crore over five years for banks.
The report also estimates the hedging cost at around $15 billion. Its calculation divides the $127 billion mobilisation into three maturity buckets: $63.5 billion for five years, $57.15 billion for three years and $6.35 billion for one year, applying an average annual USD-INR hedging cost of 3%.
| Calculation | SBI Research estimate |
|---|---|
| FCNR(B) deposits mobilised | $127 billion |
| Estimated credit multiplier | ~2.5x |
| Potential additional credit | ~₹25 lakh crore |
| Effective yield on additional credit | ~7.50% |
| Interest income/yield generated | ~₹1.8 trillion per year |
| Interest outgo at 6.5% on ₹12 lakh crore | ~₹75,000 crore per year |
| Effective NIM estimated by SBI Research | ~₹1 trillion per year |
| Notional benefit over 5 years | ~₹5 trillion (₹5 lakh crore) |
RBI could also see gains
SBI Research separately estimates a potential benefit for the RBI. It assumes that around $100 billion could be deployed through globally investable avenues at a 4% yield over five years. This could generate around $20 billion, which, after offsetting the estimated $15 billion hedging outgo, would leave approximately $5 billion, or ₹50,000 crore, in potential profitability for the RBI balance sheet.
SBI Research also disputes the assumption of sustained 5% annual rupee depreciation, calling it a relatively severe scenario compared with historical trends. Under a 3% annual depreciation assumption, it estimates the rupee could reach around ₹110 per US dollar by 2030, rather than ₹120-125 under the 5% assumption.
The report's estimates are explicitly presented as notional calculations and reflect the assumptions used by SBI Research. Its disclaimer also states that the views are those of its research team and do not necessarily reflect those of the bank or its subsidiaries.
The Foreign Currency Non-Resident (Bank) or FCNR(B) deposit scheme mobilised $127 billion in less than three months, but its costs have since become a point of debate. In its September 18 Ecowrap, SBI Research argued that estimates portraying the scheme as a ₹5 lakh crore loss overlook the benefits to banks and the Reserve Bank of India (RBI).
According to SBI Research, the calculation of a ₹5 lakh crore cost effectively counts the same foreign-exchange exposure twice. The report says the estimate combines around ₹1.75 lakh crore of additional interest costs with approximately ₹3.18 lakh crore of foreign-exchange depreciation costs, based on an assumed 5% annual depreciation of the rupee over five years.
SBI Research argues that the FCNR(B) deposits were supported by a special USD-INR swap facility designed to hedge the associated exchange-rate risk. Once the principal has been hedged, the report says, a subsequent depreciation of the rupee should not be treated as another contractual loss for banks or the RBI. It therefore describes adding the depreciation estimate to the hedging cost as double-counting the same exposure.
How SBI Research arrives at ₹5 lakh crore
The report estimates that the $127 billion mobilisation could generate additional credit for banks through the credit multiplier. Using a time-lagged multiplier of around 2.5, SBI Research estimates that the deposits could potentially support about ₹25 lakh crore in additional credit.
It assumes an effective yield of around 7.5% on this additional credit. Against this, interest outgo on ₹12 lakh crore at 6.5% is estimated at ₹75,000 crore. SBI Research says this could result in an effective net interest margin of around ₹1 lakh crore per year, translating into a notional ₹5 lakh crore over five years for banks.
The report also estimates the hedging cost at around $15 billion. Its calculation divides the $127 billion mobilisation into three maturity buckets: $63.5 billion for five years, $57.15 billion for three years and $6.35 billion for one year, applying an average annual USD-INR hedging cost of 3%.
| Calculation | SBI Research estimate |
|---|---|
| FCNR(B) deposits mobilised | $127 billion |
| Estimated credit multiplier | ~2.5x |
| Potential additional credit | ~₹25 lakh crore |
| Effective yield on additional credit | ~7.50% |
| Interest income/yield generated | ~₹1.8 trillion per year |
| Interest outgo at 6.5% on ₹12 lakh crore | ~₹75,000 crore per year |
| Effective NIM estimated by SBI Research | ~₹1 trillion per year |
| Notional benefit over 5 years | ~₹5 trillion (₹5 lakh crore) |
RBI could also see gains
SBI Research separately estimates a potential benefit for the RBI. It assumes that around $100 billion could be deployed through globally investable avenues at a 4% yield over five years. This could generate around $20 billion, which, after offsetting the estimated $15 billion hedging outgo, would leave approximately $5 billion, or ₹50,000 crore, in potential profitability for the RBI balance sheet.
SBI Research also disputes the assumption of sustained 5% annual rupee depreciation, calling it a relatively severe scenario compared with historical trends. Under a 3% annual depreciation assumption, it estimates the rupee could reach around ₹110 per US dollar by 2030, rather than ₹120-125 under the 5% assumption.
The report's estimates are explicitly presented as notional calculations and reflect the assumptions used by SBI Research. Its disclaimer also states that the views are those of its research team and do not necessarily reflect those of the bank or its subsidiaries.