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FCNR(B) Inflows May Lower Indian Banks’ Funding Costs
Indian banks are receiving more deposits from Indians who live abroad.
These deposits are called FCNR(B) deposits.
The extra money gives banks more cash to use.
Because they have more cash, banks may not need to borrow as much through costly certificates of deposit.
This could lower their funding costs by up to 50 basis points.
Banks may use the money to provide new loans or repay expensive older loans.
The additional liquidity could also improve their ability to handle withdrawals.
A brokerage estimates that the deposits could add ₹10,000-11,000 crore to banks’ yearly profits.
Robust FCNR(B) inflows could reduce Indian banks’ funding costs by up to 50 basis points.
Improved liquidity may support credit growth, especially short-term lending, and help refinance costly borrowings.
Banks raised ₹68,130 crore through certificates of deposit in August, the lowest issuance since April.
Three-month certificate-of-deposit rates fell to 5.86% and one-year rates to 7.02% by September 3.
The Reserve Bank of India reported total FCNR(B), overseas borrowing and external commercial borrowing mobilization of $136.38 billion by August 31.
- Who
- Indian banks, the Reserve Bank of India, and overseas depositors through FCNR(B) accounts.
- What
- Stronger FCNR(B) inflows are expected to improve liquidity, reduce banks’ funding costs and support lending.
- Where
- The developments concern Indian banks and were reported from New Delhi.
- When
- The figures cover developments through August 31 and September 3, 2026.
- Why
- Higher FCNR(B) deposits reduce banks’ dependence on higher-cost certificates of deposit and other borrowings.
Key facts
- Expected funding-cost reduction
- Up to 50 basis points
- August certificate-of-deposit issuances
- ₹68,130 crore, the lowest since April
- Three-month certificate-of-deposit rate
- 5.86% on September 3, down from 7.16% on June 8
- One-year certificate-of-deposit rate
- 7.02% on September 3, down 50 basis points from June 8
- Estimated annual profit pool
- ₹10,000-11,000 crore, according to Jefferies
- FCNR(B) mobilization
- $127.23 billion by August 31
- Total reported foreign-currency mobilization
- $136.38 billion, including overseas foreign-currency and external commercial borrowings
Sources
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