RBI clears the decks with FAQs [2] Commercial banks including their overseas branches are allowed to extend loans to non residents or issue standby letters of credit [SBLCs] in favor of overseas lenders against FCNR[B] deposits under the swap facility announced earlier this month[2] However RBI has not specified the quantum of loans that can be extended against such deposits or the permissible leverage leaving banks to to determine these parameters [3] SBI is offering leverage of upto nine times — Courtesy BS

For example against a $1 million FCNR[B] deposits, a bank may lend upto $9 million to the customer which can then be placed as deposits [2] Arbitrage opportunity [3] Bankers said leverage ranged between five and nine times under a similar scheme introduced in 2013…. Courtesy same news in BS

Since lending rates are lower than deposit rates, customers can enhance their overall returns thru leverage.  Courtesy same news item in BS

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