HSBC buys at least $3B in Indian government bonds since July

MACRO

HSBC buys at least $3B in Indian government bonds since July

The banking giant is deploying funds from a diaspora dollar deposit program into Indian debt that yields 3-4% more than developed-market peers

by
Editorial Team

Aug. 25, 2026

Share

Add us on Google

Via unsplash.com

HSBC Holdings has quietly become one of the biggest foreign buyers of Indian government debt, snapping up at least $3B in bonds since July. The purchases are being funded through a specialized deposit program aimed at overseas Indians, making this a story about diaspora dollars flowing back home, just not in the way most people imagined.

The move comes at a time when foreign appetite for Indian bonds has shifted from steady to voracious. Foreign investors have poured $7.7B into Indian debt year-to-date through mid-July 2026, already surpassing the $6.6B that flowed in during all of 2025. HSBC’s $3B chunk alone accounts for a massive share of that total.

Why Indian bonds, and why now

Indian 10-year government securities have been trading with yields between 6.8% and 7%. Compare that to developed-market equivalents, and you’re looking at a 3-4% premium.

Advertisement

The Indian government removed both withholding taxes and capital gains taxes on government bonds for foreign investors, effective April 1, 2026. Before that policy shift, foreign investors had to factor in tax drag that nibbled away at the yield advantage. Now the gross yield is closer to the net yield, which makes the risk-return calculus considerably more attractive for institutions like HSBC that move billions at a time.

The diaspora deposit pipeline

HSBC has been tapping into foreign-currency non-resident deposits, commonly known as FCNR deposits. These are dollar-denominated accounts held by members of the Indian diaspora living abroad. Some institutions have gone as far as providing up to 19x leverage on FCNR dollar deposits through branches in GIFT City, India’s international financial services hub in Gujarat.

Overseas Indians park their dollars in FCNR accounts. Banks use that pool of dollar funding to buy high-yielding Indian government bonds. The spread between their cost of funds and the bond yields generates profit, while NRI depositors get competitive rates. This dynamic has triggered a broader NRI fundraising push among Indian lenders.

What this means for India’s bond market

Foreign purchases in Indian bonds amounted to roughly $3.04B in July 2026 alone, suggesting that HSBC wasn’t the only major buyer.

The leveraged FCNR deposit strategy also bears watching. A 19x leverage ratio on any financial product introduces risk that can amplify losses if conditions turn. As long as Indian bond yields remain stable and the rupee doesn’t experience sharp depreciation against the dollar, the trade works.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.