HSBC Holdings Plc has taken a massive lead in the race for non-resident Indian (NRI) money. The bank has collected about $5.5 billion in foreign currency deposits by using a strategy called high leverage (offering large loans against small deposits). This move has helped HSBC beat other global banks like Standard Chartered in the hunt for diaspora wealth.

To get these funds, the London-based bank has given out over $3.5 billion in loans. This money supports special foreign currency deposit plans under a concessional window from the Reserve Bank of India (RBI). By offering these loans, HSBC has made it very easy for rich NRIs to park their money in India. This is a big win for the bank's wealth management division.

The math behind this plan is quite interesting for bankers. If an NRI invests $100,000 in a Foreign Currency Non-Resident (FCNR) deposit, HSBC allows them to borrow up to $1.9 million against it for five years. This is 19 times leverage. A customer can earn an annual return of about 14.25% while paying a loan interest rate of only 5.05% to 5.15%. This huge gap in rates makes it very profitable for the customer.

In comparison, Standard Chartered Bank has been more cautious. It has collected about $1 billion in similar deposits because it offers less leverage. Standard Chartered usually allows customers to borrow about nine times their deposit, which is much lower than HSBC’s 19 times. This difference shows how two global giants are taking very different risks to win the Indian market.

HSBC is using its strong presence in places like Singapore, Hong Kong, Dubai, and India’s GIFT City (a special financial zone in Gujarat) to find wealthy clients. Most of these new deposits are for a five-year period. Other big banks from Asia and the US are now thinking about doing the same thing. They are watching market swap rates (the price to exchange one currency's interest rate for another) before they decide to start lending.

This push for deposits is very important for the Indian economy. RBI Governor Shaktikanta Das recently noted that banks have brought in about $32 billion through FCNR(B) deposits. These funds act as a safety buffer for India’s foreign exchange reserves. When global markets are shaky, having this foreign currency helps keep the Indian Rupee stable.

For Indian bank officers, this story shows the high competition for NRI business. State Bank of India’s top economist, Soumya Kanti Ghosh, says that many old deposits maturing in August and September will likely be renewed. This means more money will stay in the Indian banking system. Bankers should expect more aggressive products from foreign rivals as they try to lock in these high-value customers.

What should we watch next? The main factor will be the RBI's stance on these high-leverage plans. If more banks join the race, the competition for NRI wealth will reach new levels. Also, any changes in global interest rates could impact how profitable these 19-times leverage deals remain for both the banks and the depositors in the long run.