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Numbers Boost: FCNR-B inflows help banks cut expensive bulk deposits

By Sohail Khan 31 August 2026, 12:53 am

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Synopsis

Numbers Boost: FCNR-B inflows help banks cut expensive bulk deposits INR vs USD dollar inflows

Kolkata: Indian lenders are aggressively shedding expensive bulk deposits as the record foreign currency non-resident (FCNR-B) mobilisation reduced the requirement for costlier domestic funds.

Analysts believe doing so is helping optimise funding costs and could potentially improve the second-quarter net interest margins (NIM), or core profitability, at several lenders.

ET Bureau

Lower funding costs could help lift NIMs and profitability, say analysts; Bigger banks could save up to 25-60 bps as mop-up tops estimates

Benefits for smaller banks would, however, remain limited as they offered higher FCNR-B rates to depositors, senior industry executives said.

"Large banks are saving 25-40 bps as they replace bulk deposits by the FCNR-B deposits as there are no hedging costs and CRR and SLR requirements. This could also lead to an improvement in NIM if banks can maintain their lending rates," said Kuntal Sur, partner, financial services at PwC India

Bank of India managing director Rajneesh Karnatak told ET last month that there could be savings of 50-60 bps as banks won't renew bulk deposits. ET spoke to a cross-section of senior bankers and everyone confirmed not renewing high-cost bulk deposits after FCNR-B inflows strengthened the medium- to long-term liquidity profile. "We are continuously reviewing the bulk deposit positions and our endeavour is to partly replace the bulk deposits with the inflow of FCNR-B deposits," a senior official at Canara Bank said. Canara Bank, for instance, mobilised $4.8 billion under the special mobilisation scheme, surpassing the $1.5 billion target.

Record Haul

All banks taken together could end up mobilising $80-85 billion through the FCNR-B window, surpassing expectations, Citi's India CEO K Balasubramanian said last week.

In the first 15 days of August, outstanding deposits with the banking sector contracted by about ₹6,500 crore despite the massive inflows from overseas. This in other words means the size of withdrawal surpassed the mobilisation amount as a reflection of the reduction in bulk deposit kitty, officials said. Banks had added a net ₹6.61 lakh crore of deposits in the preceding fortnight.

Larger banks, with relatively lower pricing and substantial FCNR-B inflows, enjoy a bigger window to substitute expensive bulk deposits. For mid size and smaller banks, the equation is different.

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