FCNR-B inflows help banks cut pricy bulk deposits
Indian banks are capitalizing on record foreign currency non-resident (FCNR-B) inflows to reduce the cost of expensive bulk deposits, potentially improving second-quarter net interest margins, according to analysts. By shedding bulk funds, bigger banks have saved 25-60 basis points in incremental deposit costs in August, with smaller banks witnessing limited benefits due to their higher FCNR-B rates.
Large banks are saving 25-40 basis points by replacing bulk deposits with FCNR-B deposits, as there are no hedging costs and no requirement to meet CRR and SLR. This could lead to an improvement in net interest margins if banks manage to maintain their lending rates. Several senior bankers confirmed plans to not renew high-cost bulk deposits and replace them with FCNR-B inflows, as the medium- to long-term liquidity profile strengthens.
Canara Bank, for instance, mobilized $4.8 billion under the special mobilization scheme, surpassing the $1.5 billion target. All banks combined could end up mobilizing $80-85 billion through the FCNR-B window, surpassing expectations.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
