A financial product promising 15% to 16% annual returns in US dollars with “zero risk” has been attracting significant attention among Non-Resident Indians (NRIs). However, investment experts are urging investors to look beyond the marketing claims and understand the risks associated with the structure before investing.
The product, marketed as a Special FCNR(B) Deposit Leverage Scheme, is based on the Reserve Bank of India’s Foreign Currency Non-Resident (Bank) deposit framework. Under the proposed structure, an NRI investing $100,000 can reportedly borrow an additional $900,000 from the same bank, creating a $1 million FCNR(B) deposit. The deposit earns around 6.5% interest, while the loan carries an interest rate of approximately 5.7%–5.8%, allowing investors to profit from the difference.
Promotional material claims the strategy can generate an effective annual return of 15.7% to 16.1% over a three-to-five-year period and describes it as having “zero interest-rate risk.” However, wealth advisors caution that the product is not as risk-free as it appears.
Abhishek Kumar, a SEBI-registered investment adviser and founder of SahajMoney, described the product as a leveraged US dollar carry trade rather than a traditional fixed deposit. According to him, the projected returns are based on ideal assumptions, including stable interest-rate spreads, minimal costs, and favorable tax treatment.
He pointed out that expenses such as loan processing fees, documentation charges, and cash-flow timing can reduce the actual returns. More importantly, while the FCNR(B) deposit rate remains fixed for the investment period, the borrowing cost may not be fixed unless specifically guaranteed in the loan agreement. If loan interest rates increase, the profit margin could shrink significantly.
Experts also warn that leverage limits financial flexibility. Premature withdrawal of the deposit could trigger penalties, lower interest earnings, and immediate loan repayment obligations, creating liquidity challenges for investors.
Taxation is another important consideration. Although FCNR(B) deposit interest is generally tax-exempt in India for eligible NRIs, investors may still be liable to pay taxes in their country of residence. For instance, US-based NRIs must comply with FATCA and FBAR reporting requirements, which could reduce post-tax returns.
Another concern is concentration risk. Under this structure, investors effectively gain exposure of more than $1 million to a single bank, while India’s DICGC deposit insurance covers only up to ₹5 lakh per depositor.
Similar concerns have been raised by market experts, including Alok Jain, founder of Weekend Investing. He noted that a large Singapore-based family office chose not to invest in the scheme despite the attractive projected returns. According to him, the investors cited political risk, policy uncertainty regarding future repatriation rules, and institutional risks associated with the financial health of the lending bank.
Both experts emphasize that the RBI’s FCNR(B) framework is legitimate and the product itself is not fraudulent. However, they stress that it should be viewed as a leveraged investment strategy, not a risk-free fixed deposit. For financially sophisticated NRIs who fully understand leverage, taxation, liquidity, and interest-rate risks, the product may serve as a useful portfolio strategy. For investors attracted solely by the promise of high, “zero-risk” dollar returns, financial advisors recommend exercising caution and carefully evaluating all associated risks before investing.
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