Banks lure NRIs with high-return FCNR(B) deposits, warn of leverage risks

Banks including HSBC, SBI, and IDBI Bank are offering leveraged FCNR(B) deposit products to NRIs with effective dollar yields of 13-16%, enabled by the RBI's concessional swap window that has attracted USD 20.72 billion since June 5, including USD 17.4 billion in fresh deposits. HSBC allows leverage of up to nearly 19 times but warns that early redemption attracts a 4% penalty on the entire deposit, potentially wiping out around 80% of the original capital. All three lenders require deposits to remain pledged until maturity, preventing independent early withdrawals without first repaying the associated loan.