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FCNR(B) Funds Set to Support Festival Season Credit Demand
Banks in India have collected a large amount of money from deposits held in foreign currencies.
This gives them extra funds that they may lend during the festival season, when people and businesses often borrow more.
RBI Deputy Governor Rohit Jain said banks should still lend carefully and follow their normal safety checks.
Some banks may first use the money to replace more expensive deposits.
India’s foreign-exchange reserves have risen above $780 billion.
Jain said these reserves must be managed safely because much of the money is borrowed.
He also warned that technology problems and cyberattacks can affect many banking services at once.
He asked bank leaders to improve technology oversight and use faster systems to detect threats.
Banks have mobilised $133 billion through FCNR(B) deposits under the RBI’s concessional swap window.
RBI Deputy Governor Rohit Jain said strong, broad-based credit demand could support lending during the festival season, while banks maintain credit standards.
India’s foreign-exchange reserves exceeded $780 billion, making it the world’s fifth-largest reserve holder, according to Jain.
Jain called technology architecture risk a first-order enterprise risk and urged stronger board oversight, real-time monitoring and coordinated AI-based cyber defences.
The RBI is encouraging states to reissue state development loans and adopt benchmark issuance strategies to improve secondary-market liquidity.
- Who
- RBI Deputy Governor Rohit Jain, Indian banks, state governments and the Reserve Bank of India.
- What
- Banks are preparing to deploy FCNR(B) liquidity amid strong credit demand, while the RBI is urging stronger technology governance, cyber defences and state-bond market liquidity.
- Where
- India, including the country’s banking system and state government securities market.
- When
- Jain made the remarks on Thursday at the 13th SBI Banking & Economics Conclave 2026; the cited reserve data was current to September 11 and deposit and credit data to August 31.
- Why
- To meet festival-season borrowing demand while preserving credit quality, protecting financial technology systems and improving the functioning of state development loan markets.
RBI’s Cautious Lending View
Industry Concerns About Excess Liquidity
Deployment of FCNR(B) Funds
RBI’s Cautious Lending View
Rohit Jain said banks can deploy the funds to meet broad-based credit demand, but lending should remain guided by credit standards, lending pipelines and asset-liability positions.
Industry Concerns About Excess Liquidity
Industry concerns focus on possible exuberant lending, particularly by smaller banks that raised more funds than expected and may lack a large wholesale lending book.
Use of Mobilised Funds
RBI’s Cautious Lending View
Banks are expected to use some of the liquidity to support corporate and retail lending as demand remains strong.
Industry Concerns About Excess Liquidity
Many banks have indicated that they will first replace high-cost deposits, reflected in falling certificate-of-deposit volumes and softer rates, before deploying remaining funds for lending.
Key facts
- FCNR(B) mobilisation
- Banks mobilised $133 billion through FCNR(B) deposits under the RBI’s concessional swap window.
- Swap-window mobilisation
- The concessional swap window saw mobilisation of more than $143 billion.
- Foreign-exchange reserves
- India’s reserves exceeded $780 billion as of September 11; they had reached $785.7 billion a week earlier.
- Global reserve ranking
- Jain said India had become the fifth-largest holder of foreign-exchange reserves globally.
- Deposit and credit growth
- Deposit growth was 17.8% and credit growth was 19.1% as of August 31, a gap of 130 basis points.
- State issuance strategy
- Nineteen states had adopted a benchmark issuance strategy for state development loans.
- Technology governance
- Jain said technology architecture risk should be treated as a first-order enterprise risk.
Quotes
Rohit Jain
RBI Deputy Governor discussing banks’ lending standards
“Banks themselves have been quite cautious about credit and doing the right thing, and we believe that healthy credit standards will be maintained”
rediff.com
“With the latest amount of forex reserves, India has now become the fifth-largest holder of forex reserves globally”
rediff.com
Sources
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