FCNR(B) scheme generates Rs 5 trillion profit

The FCNR(B) deposit scheme could generate around Rs 5 trillion in notional profit for banks over five years and add Rs 50,000 crore to the RBI's balance sheet, according to SBI Research.

Loss estimates double-count the same exposure

Critics claim the scheme costs Rs 5 trillion, but SBI Research says this counts the same foreign exchange exposure twice, combining interest costs with currency depreciation costs that are already hedged.

“The argument that the FCNR(B) scheme entails a total cost of around Rs 5 trillion is fallacious”

USD 127 billion mobilised supports bank credit

The deposits could generate Rs 25 lakh crore in additional credit using a credit multiplier of 2.5, producing Rs 1.8 trillion in annual interest income at a 7.5 percent yield.

Banks earn Rs 1 lakh crore net margin annually

Against Rs 75,000 crore in interest paid on Rs 12 lakh crore of deposits at 6.5 percent, banks earn an estimated net interest margin of Rs 1 lakh crore annually, or Rs 5 lakh crore over five years.

RBI gains Rs 50,000 crore from investments

The RBI could deploy USD 100 billion at a 4 percent yield over five years, generating USD 20 billion that offsets USD 15 billion in hedging costs and yields Rs 50,000 crore in additional profit.

Moderate rupee depreciation assumption more realistic

SBI Research questions the 5 percent annual depreciation assumption used in loss estimates, arguing a 3 percent rate is more realistic, projecting the rupee at Rs 110 per dollar by 2030 instead of Rs 120-125.