FCNR(B) windfall for banks explained: Who got highest inflows and what it means for investors
FCNR(B) deposits offer banks a cheaper and balance-sheet-efficient source of funding, but their finite tenor and initial deployment challenges could pressure margins. While ICICI Bank and Kotak Mahindra Bank stand to benefit from higher inflows, IDFC First Bank offers the strongest earnings upside. Investors may see margin pressure initially before stronger liquidity, loan growth and lower…
India's banks have attracted a large influx of foreign currency deposits in recent weeks, addressing a significant constraint in the sector, but benefits are unevenly distributed. Large private and mid-sized lenders have captured a significant share of the Foreign Currency Non-Resident (Bank) (FCNR(B)) inflows, while public sector banks have fallen behind.
Cumulative foreign exchange inflows under the Reserve Bank of India's dollar rupee swap facility reached $136.4 billion by August 31, with FCNR(B) deposits accounting for $127.2 billion, or 93% of the total. After the deadline for the facility was brought forward, inflows jumped from $65.4 billion on August 21 to $127.2 billion by month-end, exceeding initial expectations of $50-$60 billion.
This surge is expected to boost system deposit growth in fiscal 2027 to 15.4%, up from Nomura's earlier estimate of 12%.
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Also reported by 1 other outlet
- Inflows through FCNR(B) deposits will take 3-4 mths to deploy: SBI chairman business-standard.com
