Small Finance Banks Paid More Yet Won Little FCNR(B) Funding

Small finance banks tried to attract money from people living outside India by offering higher interest rates.

But they received less than 1% of the money raised through these deposits.

Bigger banks attracted more because they have more services and stronger connections overseas.

Higher rates can help bring in deposits, but they also make borrowing that money more expensive for the banks.

This can make it harder to earn a profit.

Small finance banks are also moving into loans that may earn less than microfinance loans.

Crisil Ratings expects their margins to improve in the coming years, but says managing funding costs will matter.

The banks may need to compete in ways other than offering the highest rates.