India, Sept. 3 -- A torrent of dollar deposits has crashed short-term borrowing costs for banks, as India's ambitious plan targeting overseas citizens closes with a resounding success.

Interest rates on certificates of deposit (CDs) which banks issue for short-term funds have fallen since the Reserve Bank of India incentivized dollar deposits and borrowings, showed data from Crest Finserv, an inter-dealer broking firm. Rates on three-month CDs have cooled to 6.3% against 7.09-7.23% when RBI announced the scheme on 5 June, and 7.30-8.00% at the end of March.

The central bank said on Wednesday that the scheme brought in a total of $136.4 billion till August 31 when its FCNR(B) component ended. Of this, foreign currency non-resident bank o...