Business · Economy · 8 hrs ago
Special foreign-currency inflows lift Indian banks’ deposit growth in Q2
Indian banks reported average deposit growth of 21.1% in the July-September quarter, based on an analysis of 10 lenders.
Much of the increase came from a Reserve Bank of India window that encouraged banks to attract foreign-currency deposits from non-resident Indians.
Excluding those inflows, estimated deposit growth was just 12.2%, showing that banks were still finding it difficult to attract money from domestic customers.
Lending growth was also lower when loans linked to the special window were excluded, falling from 24.2% to an estimated 18.9% across the 10 banks.
At the banking-system level, deposits continued to grow more slowly than loans, a gap that can leave banks needing to secure more funding.
The window closed on August 31 after banks mobilised nearly $133 billion, and lenders say they expect to put the extra liquidity into lending over the next two quarters while reducing reliance on costly funding.
An analysis of 10 Indian banks found that deposit growth averaged 21.1% year on year in July-September, but was estimated at 12.2% excluding special foreign-currency inflows.
The inflows came through the Reserve Bank of India’s Foreign Currency Non-Resident (Bank) swap window, which closed on August 31.
The window helped banks collectively mobilise nearly $133 billion in FCNR (B) deposits.
The gap between reported and adjusted growth points to continued difficulties in attracting domestic deposits.
Banks plan to deploy surplus liquidity into lending over the next two quarters.
- Who
- An analysis of 10 Indian banks, including RBL Bank, Kotak Mahindra Bank and ICICI Bank.
- What
- Special FCNR (B) inflows lifted reported deposit growth. Excluding them, estimated growth at the 10 banks was 12.2%, rather than 21.1%.
- When
- During the July-September quarter. The special swap window closed on August 31.
- Where
- India.
- Why
- The Reserve Bank of India’s special swap window brought in foreign-currency deposits, temporarily increasing banks’ reported deposit growth.
This story does not have two clearly opposing sides.
Reported deposit growth at the 10 banks averaged 21.1% year on year, compared with an estimated 12.2% excluding special foreign-currency inflows.
The Reserve Bank of India’s special FCNR (B) swap window closed.
Banking-system deposit growth was 17.8%, while credit growth was 19.4%, according to RBI data.
Banking-system deposit growth had moderated to 16.7%, while credit growth was 18.2%.
- Banks analysed
- 10
- Reported deposit growth
- Average 21.1% year on year in July-September
- Adjusted deposit growth
- Estimated 12.2% excluding special foreign-currency inflows
- FCNR (B) deposits mobilised
- Nearly $133 billion
- Credit-deposit ratio
- 81.6%
What people are saying
We are carrying some amount of excess liquidity currently, and I would expect that to be kind of deployed over the next two quarters
The FCNR (B) deployment will be in addition to the core deployment from the core deposit