The State Bank of India is understood to have come out with two products to tap redemption proceeds of Resurgent India Bonds, which mature from October 1.

According to market sources, while one product is meant for deposits received in India, the other is for deposits received at overseas centres.

Both the products mature in a year. The Indian rupee deposit comes with an in-built hedge for exchange rate risk.

Under the scheme, dollar deposits will be converted into rupees and a exchange rate risk provided for the entire period.

The depositor will get rupee interest rates, as applicable on NRE deposits, with the entire exchange rate risk covered by the bank, on maturity.

The other product will be similar to foreign currency-denominated deposits raised at overseas centres.

The bank proposes to offer rates in excess of the London Inter-Bank Offered rate for deposits accepted overseas.

In India, banks can offer rates on FCNR(B) deposits at a few basis points lower than LIBOR, sources said.

SBI expects to mop up most of the dollar deposits of the RIB redemption through these schemes.

According to market sources, some banks are also working out similar products to tap dollar deposits during the time RIBs come up for redemption.

This is because NRI depositors are less likely to get any other avenue offering rates as lucrative as in India, sources added.

The SBI and Reserve Bank of India together have worked out adequate arrangements so that the market does not get affected from dollar outflows and subsequent absorption of rupee funds.

SBI raised a total $4.2 billion from RIB and over five years, this corpus has grown to over $5 billion including interest.

The SBI has invested the rupee equivalents in 91-day treasury bills maturing around the redemption period and has entered into reverse repos with RBI to arrange the rupee funds.

These rupee funds will be in turn swapped with the RBI to raise the dollar equivalent to pay back the bond-holders.