‘Stratospheric’ US$127 billion from India’s diaspora to aid rupee

India attracted a record $127 billion from its diaspora through special programs, significantly exceeding estimates and providing policymakers with a powerful tool to defend the struggling rupee. Major lenders such as State Bank of India, ICICI Bank, HSBC Holdings, and Standard Chartered capitalized on this opportunity by tapping into India's 35 million-strong diaspora in hubs like Dubai, Singapore, and London.

The Foreign Currency Non-Resident (FCNR) deposits generated US$127.23 billion, while overseas foreign-currency debt and external commercial borrowings added another US$9.15 billion, totaling US$136.38 billion - surpassing the central bank's initial estimate of US$80 billion. The aggressive inflows bolstered India's forex reserves to a record high of $729.3 billion, providing the Reserve Bank of India with substantial resources to counterbalance the currency's weakness.

The special window was introduced in June to safeguard the rupee following its record low, offering to shoulder the currency-hedging costs of FCNR deposits. Lenders extended loans up to 19 times the original deposit, reaching out to non-resident Indians through various channels, including branches, relationship managers, and diaspora networks across key overseas markets.

The RBI-backed incentives made foreign-currency deposits more enticing, with rates as high as 7.75% being passed on to overseas Indians. This surge in dollar inflows not only strengthened the rupee but also propelled India's surplus current account to an estimated $80 billion for the year, according to Gaura Sen Gupta, chief economist at IDFC First Bank.