9 hrs ago
SBI Says FCNR(B) Inflows Won’t Trigger Excessive Lending
Banks received a very large amount of money through foreign-currency deposits.
This made the amount of available money in the banking system rise to almost ₹10.5 trillion.
Some people worried that banks might lend this money too quickly.
SBI Chairman C. S. Setty said banks would need about three to four months to use the funds.
He said the money would not necessarily cause excessive lending.
Banks could also use it to buy government securities or replace more expensive deposits.
The FCNR(B) facility closed on August 31 after attracting strong interest.
Setty also said smart computer systems called agentic AI could help banks do tasks such as spotting fraud and checking loan applications.
SBI Chairman C. S. Setty said FCNR(B) funds would be absorbed over three to four months.
Banks mobilised $127.2 billion through the RBI swap facility, with total inflows reaching $136.4 billion by August 31.
The inflows exceeded market expectations of $90 billion to $100 billion and lifted banking liquidity to nearly ₹10.5 trillion.
Banks can deploy the funds through government securities, replacing expensive deposits or extending loans.
Setty also said agentic AI could support fraud detection, KYC, anti-money-laundering checks, loan assessment and reconciliation.
- Who
- State Bank of India Chairman C. S. Setty, Indian banks and the Reserve Bank of India.
- What
- Banks raised substantial FCNR(B) funds through an RBI swap facility, increasing banking-system liquidity and prompting discussion about possible excess lending.
- Where
- India’s banking system; Setty made the comments at the Global Fintech Fest 2026.
- When
- The RBI launched the facility on June 8, and the FCNR(B) window closed on August 31; Setty said deployment would take three to four months.
- Why
- The funds exceeded expectations and raised concerns that surplus liquidity could accelerate lending growth.
Measured Liquidity Deployment
Excess-Lending Concerns
Effect of the inflows
Measured Liquidity Deployment
SBI Chairman C. S. Setty said banks would absorb and deploy the liquidity over three to four months, making excessive credit expansion unlikely.
Excess-Lending Concerns
The unexpectedly large inflows lifted system liquidity to nearly ₹10.5 trillion, creating concerns that surplus funds could accelerate lending growth.
How banks may use the funds
Measured Liquidity Deployment
Banks have several deployment options, including buying government securities and replacing expensive deposits, rather than directing all the funds into new loans.
Excess-Lending Concerns
Banks could extend loans with the additional liquidity, although industry experts said strong corporate credit growth could limit the extent of fresh lending.
Key facts
- FCNR(B) funds raised through swap facility
- $127.2 billion
- Total inflows by August 31
- $136.4 billion
- Market expectations
- $90 billion to $100 billion
- Banking-system liquidity
- Nearly ₹10.5 trillion
- Estimated deployment period
- About three to four months
- RBI facility launch date
- June 8
- FCNR(B) window closure
- August 31
Quotes
C. S. Setty
Chairman of State Bank of India
“The next frontier for Indian AI is not merely about building larger models, but building models that understand India’s diversity and uniqueness”
freepressjournal.in
“While the initial fixed cost of agentic AI can be high, the incremental cost can be low, creating the economics of scale”
freepressjournal.in
Sources
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