FCNR-B flows taper as higher costs trip math for double-digit returns

Inflows into the RBI's special FCNR-B deposit programme are tapering as overseas dollar funding becomes costlier, with spreads over US treasury benchmarks rising from around 100 bps to about 150 bps. This erodes the leverage math that would have delivered double-digit returns of about 14 percent to HNI clients over a three to five year period. SBI and Bank of Baroda had to pull back their dollar bond issues last month, while HDFC Bank raised 750 million dollars via five-year bonds priced at 90 bps above the five-year US treasury.