KOCHI: Nearly three decades after Malayali expatriates emerged as one of the largest contributors to the 1998 Resurgent India Bonds (RIBs) scheme, Kerala’s global diaspora is once again at the forefront of a major foreign-currency mobilisation drive.
This time, it is the Reserve Bank of India’s special Foreign Currency Non-Resident (Bank) [FCNR(B)] deposit scheme that is drawing strong interest from non-resident Keralites, particularly those in the Gulf, as banks offer some of the most attractive dollar deposit rates in years.
The response is significant for Kerala, where NRI deposits remain the backbone of the banking system. As on March 31, 2026, total NRI deposits with banks in the state stood at Rs 3.24 lakh crore, according to State Level Bankers’ Committee (SLBC) data. Federal Bank accounted for the largest share with Rs 92,326.10 crore, followed by State Bank of India (Rs 84,966.67 crore), South Indian Bank (Rs 31,947.18 crore), Canara Bank (Rs 23,351.92 crore), and CSB Bank (Rs 5,431.74 crore).
The RBI’s special swap window has altered the economics of FCNR(B) deposits by absorbing the foreign exchange hedging cost for banks. With the removal of interest rate ceilings, lenders have been able to offer substantially higher returns on foreign-currency deposits without exposing depositors to rupee depreciation risk.
“The FCNR(B) special drive presents a highly attractive opportunity for NRIs, with rates improving substantially following the RBI’s provision to absorb swap costs,” said Joy P V, executive vice-president and country head–retail liability & fee products, Federal Bank.
According to him, depositors can maximise their tax-free (in India) foreign currency holdings at competitive rates over a longer tenure. The bank is seeing strong demand from existing customers while also attracting new NRI clients because of the attractive pricing.
South Indian Bank has already mobilised around $50 million through the special FCNR(B) drive.
“The scheme is attractive because banks are able to offer higher interest rates on three-to-five-year FCNR(B) deposits, while the RBI’s concessional forex swap facility effectively removes the hedging cost,” said Prashanth George Tharakan, deputy general manager and head of NR business & investor relations, South Indian Bank.
He said the mobilisation has been driven largely by the bank’s existing NRI customers, indicating higher wallet share rather than a large influx of new customers. The overwhelming share of deposits has come from the GCC countries, with Europe and other markets contributing comparatively less.
CSB Bank too has reported healthy growth in FCNR(B) mobilisation. While declining to disclose the amount raised, Narendra Dixit, head of retail banking, CSB Bank, said RBI’s move has significantly enhanced the attractiveness of the product.
“With banks passing on this benefit through higher deposit rates, investors can now access some of the most competitive returns in the market,” he said, adding that CSB is offering up to 7.05% per annum on five-year FCNR(B) deposits. Like other Kerala-based banks, the bulk of the deposits has come from Gulf-based NRIs across the UAE, Saudi Arabia, Oman, Qatar, Kuwait, and Bahrain.
Global brokerage Macquarie believes the RBI’s measures could bring in $40-50 billion of foreign exchange flows, helping stabilise the rupee. Its research notes that, unlike the 2013 FCNR(B) mobilisation, the RBI is now bearing the hedging cost—estimated at around 3%—allowing banks to offer foreign currency deposit rates of about 6-7%.
The brokerage also points to another factor boosting returns. Since banks can lend against eligible FCNR(B) deposits, the use of leverage could enable NRIs to earn effective internal rates of return (IRR) of 12-22%, making the scheme one of the most attractive foreign currency investment opportunities currently available for overseas Indians.
The early response to the deposit scheme suggests that Kerala’s Gulf connection remains as strong as ever. As banks compete for overseas savings, Malayali expatriates are once again proving to be among India’s most dependable providers of foreign currency capital, officials said.
NRI DEPOSITS BACKBONE OF STATE BANKING SYSTEM
According to State Level Bankers’ Committee (SLBC) data (as on March 31, 2026), Federal Bank accounted for the largest share of NRI deposits with I92,326.10 crore, followed by State Bank of India with I84,966.67 crore, South Indian Bank with I31,947.18 crore, Canara Bank I23,351.92 crore, and CSB Bank with I5,431.74 crore.
J3.24L cr Total NRI deposits with banks in the state
