India's FCNR (B) deposit scheme mobilised a remarkable $127 billion in under three months, and could generate a notional profit of approximately ₹5 lakh crore (₹5 trillion) for banks over five years, along with an additional ₹50,000 crore (₹0.5 trillion) for the Reserve Bank of India (RBI), according to a report by SBI Research released on 19 September 2026. The findings directly push back against critics who have argued that the scheme is too costly to be sustainable.

What SBI Research Found

The SBI Research report examined the scheme's financials across four key dimensions — cost to the banking system, hedging mechanics, liquidity management, and RBI-level returns. On costs, the report argued that concerns over interest outgoes and hedging charges are, at best, a distraction. The scheme's contracted interest rates of 6–6.5 per cent compare favourably against prevailing dollar-denominated yields for AAA-rated corporates, which are currently hovering at 7.5–8.0 per cent in global markets, making the FCNR (B) deposits an attractive instrument for non-resident depositors.

The report also pointed out that elevated bulk deposit costs in domestic markets — which account for 38 per cent of bulk borrowings — could ease somewhat as the new liquidity pools from the scheme exert a sobering effect on wholesale deposit and certificate-of-deposit pricing.

The Hedging Argument Rebutted

Critics had contended that adding hedging costs on top of anticipated currency depreciation produces a notional loss of ₹5 trillion. SBI Research rejected this reasoning as 'completely incorrect.' The report explained that once liabilities are hedged by counterparties through back-to-back hedging arrangements, the direction of currency movement becomes irrelevant at the date of maturity. Counting both the cost of hedging and the cost of depreciation simultaneously, the report argued, amounts to double-counting the same exposure — 'purely a work of fiction,' in its words.

Liquidity Concerns Called Manageable

The sudden and unanticipated surge in liquidity from the scheme has been portrayed by sceptics as a systemic stress point. SBI Research disagreed, noting that several demand-side levers — festive season consumption, credit disbursement pipelines, new advance sanctions, advance tax outflows, and GST payment cycles — are sufficient to absorb the elevated systemic liquidity without triggering destabilisation. The report characterised the liquidity management challenge as well within the system's existing toolkit.

RBI's Return on Deployment

For the RBI, the report estimated that deploying approximately $100 billion in globally permissible investment avenues at a yield of around 4 per cent over five years would generate $20 billion in returns. After accounting for hedging outflows of roughly $15 billion, the central bank could net a surplus of approximately $5 billion, or around ₹50,000 crore at current exchange estimates. The report noted that RBI's investment mandate is governed by its board-approved policy, and that the prevailing high-yield environment could push actual returns even higher than the base estimate. Notably, the RBI had taken the decision to curtail the scheme early — preponing its closure — though the report acknowledged that the scale of fund flows still exceeded initial projections.

Outlook for Banks and the Broader Economy

The aggregate picture painted by SBI Research is one of a scheme that, despite its headline complexity, delivers a net positive for both commercial banks and the central bank. The report's four-part analysis concludes that the macro fundamentals underpinning the FCNR (B) inflows are more resilient than critics have allowed. With the five-year maturity window still open and deployment ongoing, the actual profit outcomes will depend on exchange-rate stability, global yield trajectories, and the RBI's investment execution. Market participants and analysts will be watching the next quarterly liquidity data for early signals on absorption capacity.