State Bank of India draws over $1.5 billion in offshore deposits

State Bank of India has so far raised more than $1.5 billion from foreign-currency deposits under a special programme launched last month for overseas citizens, people familiar with the matter said.

The country's largest lender will also provide leverage of nine times to depositors, the people said, asking not to be identified as the details are private. The facility will allow customers to scale up the amount of money they would deposit under the programme.

In June, the Reserve Bank of India offered full hedging-cost support for banks raising three- to five-year foreign-currency deposits as part of broader efforts to shore up reserves amid the US-Iran war. The move gives lenders more room to offer attractive rates on such deposits.

Banks have since stepped up efforts to garner deposits from India's 35 million-strong diaspora, with some offering more than 7% interest on certain FCNR(B) deposits. They are also expanding marketing efforts and deploying relationship managers in key expatriate markets such as the Middle East, Singapore and London.

Flows from FCNR deposits across the banking system totalled $166 million in April, according to provisional RBI data, compared with $272 million a year earlier. The figures are from before the RBI announced the concessional swap facility and show how quickly SBI has attracted deposits under the programme.

An SBI spokesperson did not reply to an email seeking comment.

The lender offers 5.25% to 5.75% on three- to five-year foreign-currency deposits of up to $1 million, and 5.5% to 6% on larger deposits, according to its website.

The drive to raise money from the diaspora revives a playbook last used by lenders during the 2013 taper tantrum, when India garnered about $34 billion to stem the rupee's decline.