Mumbai, June 11 -- The Reserve Bank of India's (RBI) decision to absorb the foreign exchange hedging cost on fresh foreign currency non-resident (bank), or FCNR (B), deposits is creating an unusual opportunity for overseas Indians: the possibility of earning equity-like returns from what is essentially a fixed-income product, market participants said.

The move, announced on 5 June as part of a broader package to attract dollar inflows and support the Indian rupee, allows banks to raise fresh and renew existing FCNR (B) deposits of three to five years and swap the dollars with the RBI at a concessional rate. Hedging cost for banks will be zero, effectively removing a major cost that previously prevented banks from offering attractive rate...