Archive · 3 Sep 2026
Record FCNR Inflows Boost Outlook for Four Bank Stocks
Banks received a very large amount of foreign-currency deposits before a special Reserve Bank of India window ended.
The deposits can be changed into rupees that banks may use for lending.
The new money pushed surplus liquidity in the banking system above Rs 6 lakh crore.
Motilal Oswal believes this could help banks grow their loans faster.
It especially prefers ICICI Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank.
ICICI Bank collected the largest amount among the Indian banks discussed.
Banks may not earn much profit from these deposits immediately because their interest margins could be squeezed.
Margins may improve later if banks successfully use the funds to make more loans.
Banks attracted $127 billion, or about Rs 10.6 lakh crore, through FCNR(B) deposits before the RBI window closed on August 31.
Motilal Oswal selected ICICI Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank as preferred financial stocks.
ICICI Bank mobilised about Rs 1.70 lakh crore, while State Bank of India raised about Rs 85,000 crore and Kotak Mahindra Bank about Rs 32,000 crore.
The inflows lifted banking-system surplus liquidity above Rs 6 lakh crore and helped deposit growth reach about 14.7% year-on-year by August 15.
Motilal Oswal expects system credit growth to rise to roughly 15.5%-16.0% in FY27E, although near-term net interest margins may remain pressured.
- Who
- Indian banks, including ICICI Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank, and brokerage Motilal Oswal.
- What
- A record $127 billion in FCNR(B) deposits entered banks, prompting Motilal Oswal to identify four preferred bank stocks and raise its credit-growth outlook.
- When
- The deposits were mobilised before the special RBI window closed on August 31; deposit growth data cited was as of August 15.
- Where
- India’s banking system, through deposits raised under a Reserve Bank of India scheme.
- Why
- The deposits increased liquidity and could support faster loan growth, although limited spreads may pressure margins initially.
Growth Opportunity
Margin and Deployment Risks
Credit expansion
Growth Opportunity
Motilal Oswal says the larger funding pool could allow banks to expand loans faster and supports a stronger systemic credit-growth phase.
Margin and Deployment Risks
The benefit depends on how quickly and effectively banks deploy the deposits into loans; the article says the immediate benefit is improved liquidity rather than guaranteed loan growth.
Earnings impact
Growth Opportunity
Deployment of the deposits and an improving asset mix could support faster balance-sheet growth and earnings, according to Motilal Oswal.
Margin and Deployment Risks
Banks may earn only a limited spread on the leveraged overseas portion of FCNR(B) deposits, putting near-term net interest margins under pressure.
Preferred stocks
Growth Opportunity
Motilal Oswal prefers ICICI Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank because of their mobilisation, lending potential or exposure to accelerating credit growth.
Margin and Deployment Risks
The article notes that investors must assess what banks do with the funds and independently evaluate brokerage recommendations before making investment decisions.
- FCNR(B) inflows
- $127 billion, or around Rs 10.6 lakh crore, according to the article.
- Special window
- The Reserve Bank of India window closed on August 31.
- Liquidity
- Banking-system surplus liquidity exceeded Rs 6 lakh crore by August 31.
- Top mobilisation
- ICICI Bank mobilised around Rs 1.70 lakh crore, representing 14% of total FCNR(B) inflows.
- Other major mobilisers
- State Bank of India raised around Rs 85,000 crore, while Kotak Mahindra Bank raised around Rs 32,000 crore.
- Credit-growth forecast
- Motilal Oswal estimates system credit growth of approximately 15.5%-16.0% for FY27E, up from its earlier 14.3% estimate.
- Margin outlook
- Net interest margins may face near-term pressure because of limited spreads on the overseas leveraged portion of FCNR(B) deposits.