India’s latest effort to draw dollars from its overseas community worked quickly, but the response also exposed a deeper question about how the country finances growth. The Foreign Currency Non-Resident (Bank), or FCNR (B), deposit programme attracted $127 billion, a record for such Indian programmes, after the rupee weakened sharply and energy costs raised concerns about the country’s foreign-exchange needs. Yet the money was not enough to trigger a strong rally in the currency, suggesting that deposits can provide a buffer without resolving the broader challenge of attracting durable investment.
The episode began as the rupee moved towards 97 to the dollar, from about 86 a year earlier, while the war in Iran increased concern over India’s energy import bill. Prime Minister Narendra Modi urged overseas Indians at a community event in Paris to deepen their engagement with India. At the Reserve Bank of India, Governor Sanjay Malhotra and senior officials discussed ways to raise dollars through the banking system, according to people familiar with the talks who were not authorised to speak publicly.
One proposal involving state-bank borrowing was dropped after bankers warned that raising money when the rupee was weak could signal financial stress. It could also have increased borrowing costs by unsettling investors. Policymakers instead relied on a mechanism that had worked during the 2013 market turbulence, when expectations of tighter US monetary policy triggered an exodus of foreign capital from emerging markets.
Under the latest arrangement, the RBI covered banks’ cost of hedging against currency movements. That allowed commercial banks to offer more attractive rates to overseas Indians placing foreign-currency deposits. Some banks offered rates as high as 7.75% to depositors willing to lock in their money for several years. The incentive was withdrawn a month ahead of schedule after the deposits reached the record level.
The immediate success reflects the scale of the Indian diaspora and the financial capacity it has accumulated. India’s overseas community, estimated in the report at 35 million people, is no longer defined only by blue-collar workers in the Gulf. It now includes senior professionals, business owners, doctors, bankers and technology executives. That change matters because the diaspora is becoming not merely a source of household remittances but also a pool of savings that banks, investment firms, property developers and financial centres compete to access.
The distinction between these forms of capital is important for cities and the built environment. Remittances usually enter household budgets and support consumption, education, healthcare and savings. Deposits can strengthen banks’ foreign-currency position, but they remain liabilities that must eventually be repaid. Property purchases and investment funds can finance urban construction and business expansion, while direct investment can bring ownership, management expertise and international networks.
The numbers show why Indian institutions are pursuing this market. Remittances to India exceeded $150 billion in 2025, according to World Bank data cited in the report, more than twice the amount sent to Mexico, the world’s second-largest recipient. India attracted almost $100 billion in gross foreign direct investment in the year ended March 2026, according to official figures. The comparison highlights both the strength of remittances and the concern that India may be relying too heavily on money that supports external liquidity but does not necessarily create productive capacity.
The report’s investor accounts show how the FCNR programme worked at the individual level. Avijit Chatterjee, an Abu Dhabi-based engineer, placed $40,000 in June and said his foreign-currency deposits had reached $100,000. His stated priorities were higher returns, protection from exchange-rate risk and the need to support his son’s education abroad. Piyush Jhunjhunwala, founder of Dubai-based Stockify Fintech, placed $1 million, using dollar borrowing to increase the potential return from the difference between the loan cost and the deposit rate.
The second example also shows the limits of treating diaspora capital as uncomplicated support. Leveraged deposits can increase returns when the spread works in the investor’s favour, but they can also magnify losses if short-term borrowing costs move against the depositor. The programme therefore attracted capital through pricing and currency protection, not only through sentiment or patriotism.
India’s overseas investors are also moving beyond traditional property purchases. At Singapore-based investment firm Lighthouse Canton, non-resident Indians account for about half of its $7 billion in global assets, compared with a negligible share about eight years ago, according to its group chief executive Shilpi Chowdhary. The firm said these investors were increasingly exploring equities, startups and venture capital funds.
GIFT City is part of that institutional shift. Indian regulators relaxed restrictions in 2024 on non-resident Indians investing in foreign funds established there. Since then, investments by the overseas community in GIFT City have exceeded $7 billion, according to the report. The financial hub’s special regulatory and tax framework is intended to give global investors an India-linked platform without requiring all transactions to move through the country’s conventional financial channels.
The urban investment consequences are already visible in property markets. Inflows into India’s property market exceeded $14 billion in 2025, a record according to CBRE Research, with foreign investors, including high-net-worth individuals and NRIs, accounting for about a quarter. At DLF, India’s largest real estate developer, NRIs represented 27% of sales in the year through March 2025, up from 23% a year earlier.
These figures do not establish that diaspora money is responsible for the entire property-market expansion. They do show that developers regard overseas Indians as a growing customer and capital segment. For the housing market, that can mean stronger demand for premium homes, investment properties and projects marketed across Dubai, Singapore, Europe and other overseas hubs. It also raises a distribution question: the segments most attractive to international buyers may not be the segments where housing pressure is greatest for residents.
The institutional architecture around this capital is expanding as well. Banks and asset managers are conducting overseas roadshows, while developers are building dedicated sales channels for NRIs. HSBC bankers held events for high- and ultrahigh-net-worth Indians in Hong Kong, Manila, Singapore and the Middle East, according to a person familiar with the events. The questions reportedly included the use of leverage, its risks and how the dollars would be deployed. This is a sign of a more sophisticated financial market, but also of the need for clearer understanding of the risks attached to cross-border products.
The investment behaviour of NRIs may make this pool especially attractive to Indian markets. Zerodha, one of India’s largest stockbrokers, said its more than 50,000 NRI clients tend to invest more and hold for longer than resident investors. Earlier in the year, their accounts were worth almost 10 times as much on average as those of resident investors. Longer holding periods can reduce the volatility associated with short-term foreign portfolio flows, although the figure comes from the brokerage’s own client base rather than the market as a whole.
The rupee’s response indicates why policymakers cannot treat one successful fundraising exercise as a complete solution. The currency rose during the week the FCNR fundraising ended, but the inflow did not produce a strong rally. The report links that limited effect partly to weakening foreign-investor sentiment towards India. In an August Bank of America survey of fund managers, India replaced Indonesia as Asia’s least-preferred stock market.
That tension defines India’s current capital strategy. The country has a large and increasingly affluent diaspora, but it also needs capital that remains invested in businesses and productive assets rather than being attracted mainly by a temporary interest-rate incentive. Foreign direct investment is particularly valuable in this respect because, unlike bank deposits, it does not have to be repaid. It can also bring technology, management capabilities, supply-chain relationships and access to overseas markets.
Former RBI Governor Duvvuri Subbarao described remittances as “good money” because they have grown from a modest source of foreign exchange into an important buffer for India’s external finances. He argued that lower transaction costs and a reduced tax burden could make it easier for overseas Indians to send money to India. But Devesh Kapur of Johns Hopkins University’s School of Advanced International Studies said direct investment could make the diaspora more powerful, pointing to overseas Chinese entrepreneurs who helped finance factories and connect them to international supply chains.
That comparison is relevant to India’s urban economy because productive investment shapes more than balance sheets. It can determine where factories, offices, logistics networks, housing and transport infrastructure are built, and whether financial flows generate jobs and durable economic activity. Deposits and property purchases have value, but they do not automatically create the same industrial and institutional linkages as direct ownership in operating businesses.
The durability of the diaspora as a financial backstop is not guaranteed. The report cites a global immigration crackdown that is slowing the flow of Indians overseas. Fund managers also warn that second- and third-generation Indians may have weaker ties to India and may compare its investment opportunities with those available elsewhere. The challenge, in Subbarao’s words, is to maintain an emotional connection while making it financially easier and institutionally safer to invest.
India’s FCNR success therefore confirms two things at once. The overseas community can provide a rapid source of foreign currency during periods of pressure, and its wealth is increasingly connected to Indian property, financial markets and new investment platforms. But the episode also shows that emergency deposits cannot substitute for a broader strategy to attract long-term capital. For cities and the built environment, the important question is not simply how many dollars the diaspora sends, but whether those dollars support affordable housing, productive businesses and durable urban infrastructure or remain concentrated in financial and premium property markets.
