Archive · 6 Oct 2026
FCNR-B Deposits Fuel Bank Growth but Pressure Margins
Banks have received a large amount of money through FCNR-B deposits.
This has helped them grow and rely less on some other ways of borrowing.
But banks may not be able to lend or invest all the new money right away.
Until they do, the deposits can add costs without adding as much income.
That could make banks’ profit margins smaller.
JM Financial expects some banks’ margins to fall in Q2FY27.
It still expects net interest income to grow about 12% year over year across the banks it covers.
Investors will watch how quickly banks put the new money to work and how much it earns.
JM Financial says FCNR-B inflows have helped banks expand balance sheets and reduce reliance on other funding sources.
Across 30 banks, loan growth was 19.1% year over year and deposit growth was 15.8% in Q2FY27.
HDFC Bank, Axis Bank and Kotak Bank mobilised ₹1.10 lakh crore, ₹1.02 lakh crore and ₹55,300 crore, respectively, in FCNR-B deposits.
JM Financial expects quarterly net interest margin declines of 14–18 basis points at ICICI Bank, Axis Bank and Kotak Bank.
The brokerage forecasts about 12% year-over-year net interest income growth for its coverage universe and says deployment of funds will be important to watch.
- Who
- Banks, including HDFC Bank, Axis Bank, Kotak Bank, ICICI Bank and SBI; the analysis is from JM Financial.
- What
- FCNR-B deposits are supporting bank funding and loan growth, but are expected to put pressure on net interest margins.
- When
- Q2FY27; the article also cites year-over-year growth and quarter-over-quarter margin expectations.
- Where
- India's banking sector.
- Why
- Banks may take time to deploy the additional deposits into loans and other income-generating assets, while muted CASA growth also contributes to expected margin pressure.
Growth benefit
Margin risk
Effect of FCNR-B inflows
Growth benefit
The deposits have helped banks expand their balance sheets and reduce dependence on other funding sources.
Margin risk
If banks cannot quickly deploy the funds into earning assets, their liability base can grow faster than income, pressuring margins.
Loan growth and earnings
Growth benefit
Headline loan growth was strong, and JM Financial expects about 12% year-over-year NII growth across its coverage universe.
Margin risk
Loan growth figures are lower when FCNR-B-related effects are excluded, and the brokerage expects NIM declines at several banks.
- Loan growth across 30 banks
- 19.1% year over year and 6.6% quarter over quarter in Q2FY27
- Deposit growth across 30 banks
- 15.8% year over year and 5.8% quarter over quarter in Q2FY27
- FCNR-B deposits mobilised
- HDFC Bank: ₹1.10 lakh crore; Axis Bank: ₹1.02 lakh crore; Kotak Bank: ₹55,300 crore, gross
- Certificate of deposit issuances
- Down 16% quarter over quarter in Q2FY27
- Expected NIM declines
- 14–18 basis points quarter over quarter at ICICI Bank, Axis Bank and Kotak Bank; about 5 basis points at HDFC Bank and 3 basis points at SBI
- Expected NII growth
- About 12% year over year for JM Financial's coverage universe in Q2FY27
- Adjusted loan growth
- Kotak: 18.8% versus headline 24.7%; Axis: 18.8% versus 22.7%; HDFC: 14.3% versus 16.3%, excluding the cited FCNR-B-related effects