'Zero-risk' 16% returns in dollars? Why experts say NRIs should read the fine print first
A leveraged FCNR(B) deposit scheme promising "zero-risk" returns of up to 16% in US dollars is drawing attention among NRIs. While the structure is RBI-backed, wealth experts say investors should understand the leverage, tax, liquidity and policy risks before signing up.
- Jul 16, 2026,
- Updated Jul 16, 2026 2:31 PM IST
A financial product promising "zero-risk" returns of 15% to 16% in US dollars is generating buzz among Non-Resident Indians (NRIs), but wealth advisers say investors should carefully evaluate the risks hidden behind the headline numbers before committing large sums.
The product, marketed as a Special FCNR(B) Deposit Leverage Scheme, is built around the Reserve Bank of India's (RBI) FCNR(B) deposit framework. Promotional material claims that an NRI investing $100,000 can borrow $900,000 from the same bank, creating a $1 million FCNR(B) deposit. The deposit earns around 6.5% annually, while the loan costs about 5.7% to 5.8%, allowing the investor to earn the spread.
Marketing brochures project an effective yield of 15.7% to 16.1% over three to five years and even describe the structure as carrying "zero interest rate risk."
However, Abhishek Kumar, SEBI-registered Investment Adviser (RIA) and founder of SahajMoney, says investors should understand that this is not a conventional fixed deposit.
"When I hear 'zero risk' and '16% in USD' in one sentence, I double check," Kumar said in a social media post after reviewing a promotional flyer.
According to him, the structure is essentially a leveraged USD carry trade, where returns depend on the spread between the deposit rate and the borrowing cost.
Returns may be lower
Kumar says the projected 15-20% yield is based on ideal assumptions, including stable interest-rate spreads, no additional costs and favourable tax treatment.
"The yield math is sales math," he said, pointing out that loan processing charges, documentation fees, cash-flow timing and other expenses can reduce the actual internal rate of return (IRR). The returns are attractive, he says, but far from guaranteed.
Interest-rate and liquidity risks
One of the biggest risks lies in the loan itself.
While the FCNR(B) deposit rate is fixed for three to five years, the borrowing cost may not be fixed unless explicitly stated in the loan agreement. If interest rates rise, the spread between the deposit return and loan cost could narrow sharply.
Kumar also notes that leverage reduces flexibility. Prematurely breaking the deposit could result in lower deposit interest, mandatory loan repayment and breakage charges, potentially turning an enhanced-yield strategy into a liquidity challenge.
| Particulars | Illustrative Amount |
|---|---|
| NRI's own investment | USD 100,000 |
| Bank loan against deposit | USD 900,000 |
| Total FCNR(B) deposit | USD 1,000,000 |
| FCNR(B) deposit interest (6.5% p.a.) | USD 65,000 |
| Loan interest (5.8% on USD 900,000) | USD 52,200 |
| Gross interest spread | USD 12,800 |
| Return on own capital (USD 12,800 ÷ USD 100,000) | 12.8% |
Scenario at a higher deposit rate
| Particulars | Illustrative Amount |
|---|---|
| NRI's own investment | USD 100,000 |
| Bank loan | USD 900,000 |
| Total FCNR(B) deposit | USD 1,000,000 |
| FCNR(B) deposit interest (7.0% p.a.) | USD 70,000 |
| Loan interest (5.7% on USD 900,000) | USD 51,300 |
| Gross interest spread | USD 18,700 |
| Return on own capital (USD 18,700 ÷ USD 100,000) | 18.7% |
Note: The calculations are illustrative and exclude loan processing fees, documentation charges, taxes, premature withdrawal penalties, and changes in borrowing costs.
MUST READ: SBI Research sees FY27 inflation averaging 5%; says stable rupee crucial as imported inflation rises
Tax and banking risks
Kumar also cautions that while eligible FCNR(B) interest may be tax-free in India, many NRIs remain taxable in their country of residence. For example, US-based investors may have to report the income and comply with FATCA and FBAR disclosure requirements, reducing post-tax returns.
He further points out that investors end up with an exposure exceeding $1 million to a single Indian bank, whereas DICGC deposit insurance is limited to ₹5 lakh per depositor.
Family offices remain cautious
Similar concerns have been raised by Alok Jain, founder of Weekend Investing, who said a large Singapore-based family office recently told him it was not participating in the FCNR deposit scheme despite the attractive returns.
According to Jain, the family office considered itself a conservative investor and was uncomfortable with the high leverage involved.
He said the investors cited three key risks: political risk if there is a change in government over the next three to five years, policy risk if repatriation rules are altered even without a change in government, and institutional risk if the underlying bank faces financial distress.
"There is no free lunch in the world and some risk will need to be assumed even though it may feel there isn't any," Jain said.
Kumar also emphasised that the RBI's framework is genuine and the product itself is not a scam. However, he believes it should be viewed for what it is—a leveraged carry trade rather than a risk-free fixed deposit. For sophisticated NRIs who understand leverage, taxation, liquidity and interest-rate risk, it can be a useful strategy. But for those attracted solely by the promise of "zero-risk" double-digit dollar returns, experts say caution is essential.
MUST READ: Can banks extend loans to non-residents against FCNR (B) deposits? Here’s what RBI says
A financial product promising "zero-risk" returns of 15% to 16% in US dollars is generating buzz among Non-Resident Indians (NRIs), but wealth advisers say investors should carefully evaluate the risks hidden behind the headline numbers before committing large sums.
The product, marketed as a Special FCNR(B) Deposit Leverage Scheme, is built around the Reserve Bank of India's (RBI) FCNR(B) deposit framework. Promotional material claims that an NRI investing $100,000 can borrow $900,000 from the same bank, creating a $1 million FCNR(B) deposit. The deposit earns around 6.5% annually, while the loan costs about 5.7% to 5.8%, allowing the investor to earn the spread.
Marketing brochures project an effective yield of 15.7% to 16.1% over three to five years and even describe the structure as carrying "zero interest rate risk."
However, Abhishek Kumar, SEBI-registered Investment Adviser (RIA) and founder of SahajMoney, says investors should understand that this is not a conventional fixed deposit.
"When I hear 'zero risk' and '16% in USD' in one sentence, I double check," Kumar said in a social media post after reviewing a promotional flyer.
According to him, the structure is essentially a leveraged USD carry trade, where returns depend on the spread between the deposit rate and the borrowing cost.
Returns may be lower
Kumar says the projected 15-20% yield is based on ideal assumptions, including stable interest-rate spreads, no additional costs and favourable tax treatment.
"The yield math is sales math," he said, pointing out that loan processing charges, documentation fees, cash-flow timing and other expenses can reduce the actual internal rate of return (IRR). The returns are attractive, he says, but far from guaranteed.
Interest-rate and liquidity risks
One of the biggest risks lies in the loan itself.
While the FCNR(B) deposit rate is fixed for three to five years, the borrowing cost may not be fixed unless explicitly stated in the loan agreement. If interest rates rise, the spread between the deposit return and loan cost could narrow sharply.
Kumar also notes that leverage reduces flexibility. Prematurely breaking the deposit could result in lower deposit interest, mandatory loan repayment and breakage charges, potentially turning an enhanced-yield strategy into a liquidity challenge.
| Particulars | Illustrative Amount |
|---|---|
| NRI's own investment | USD 100,000 |
| Bank loan against deposit | USD 900,000 |
| Total FCNR(B) deposit | USD 1,000,000 |
| FCNR(B) deposit interest (6.5% p.a.) | USD 65,000 |
| Loan interest (5.8% on USD 900,000) | USD 52,200 |
| Gross interest spread | USD 12,800 |
| Return on own capital (USD 12,800 ÷ USD 100,000) | 12.8% |
Scenario at a higher deposit rate
| Particulars | Illustrative Amount |
|---|---|
| NRI's own investment | USD 100,000 |
| Bank loan | USD 900,000 |
| Total FCNR(B) deposit | USD 1,000,000 |
| FCNR(B) deposit interest (7.0% p.a.) | USD 70,000 |
| Loan interest (5.7% on USD 900,000) | USD 51,300 |
| Gross interest spread | USD 18,700 |
| Return on own capital (USD 18,700 ÷ USD 100,000) | 18.7% |
Note: The calculations are illustrative and exclude loan processing fees, documentation charges, taxes, premature withdrawal penalties, and changes in borrowing costs.
MUST READ: SBI Research sees FY27 inflation averaging 5%; says stable rupee crucial as imported inflation rises
Tax and banking risks
Kumar also cautions that while eligible FCNR(B) interest may be tax-free in India, many NRIs remain taxable in their country of residence. For example, US-based investors may have to report the income and comply with FATCA and FBAR disclosure requirements, reducing post-tax returns.
He further points out that investors end up with an exposure exceeding $1 million to a single Indian bank, whereas DICGC deposit insurance is limited to ₹5 lakh per depositor.
Family offices remain cautious
Similar concerns have been raised by Alok Jain, founder of Weekend Investing, who said a large Singapore-based family office recently told him it was not participating in the FCNR deposit scheme despite the attractive returns.
According to Jain, the family office considered itself a conservative investor and was uncomfortable with the high leverage involved.
He said the investors cited three key risks: political risk if there is a change in government over the next three to five years, policy risk if repatriation rules are altered even without a change in government, and institutional risk if the underlying bank faces financial distress.
"There is no free lunch in the world and some risk will need to be assumed even though it may feel there isn't any," Jain said.
Kumar also emphasised that the RBI's framework is genuine and the product itself is not a scam. However, he believes it should be viewed for what it is—a leveraged carry trade rather than a risk-free fixed deposit. For sophisticated NRIs who understand leverage, taxation, liquidity and interest-rate risk, it can be a useful strategy. But for those attracted solely by the promise of "zero-risk" double-digit dollar returns, experts say caution is essential.
MUST READ: Can banks extend loans to non-residents against FCNR (B) deposits? Here’s what RBI says