New Delhi, Sept. 3 -- India tapped its vast diaspora for a record $127 billion through a special deposit program, a fundraising bonanza that economists say could come with a hefty $10.6 billion bill for the country's central bank.

The potential cost stems from the Reserve Bank's decision to shield banks from currency risk on the funds they raised overseas. In addition to the $127 billion raised through the so called Foreign Currency Non-Resident (Bank) plan, the RBI also attracted $9.15 billion from overseas foreign-currency debt and external commercial borrowings. That took the total inflows to $136.38 billion, exceeding the RBI's $80 billion estimate.

The central bank had agreed to protect banks through a favorable swap facility estim...