Bank advances on deposits jump 53% as lenders tap foreign currency reserves

Bank advances against fixed deposits have registered a steep 53.3 per cent increase to reach Rs 2.17 trillion in September 2026, according to latest data released by the Reserve Bank of India. This pronounced growth far exceeds the 19.4 per cent year-on-year expansion in overall bank credit, signalling a marked shift in how lenders are deploying capital.

The surge is primarily attributed to banks leveraging Foreign Currency Non-Resident (FCNR(B)) deposits as collateral for advancing credit. FCNR(B) accounts, which allow non-resident Indians to park funds in foreign currency, have emerged as a key tool for banks to mobilise liquidity and expand lending capacity without tapping domestic deposit bases.

Industry analysts view the trend as a reflection of banks' strategy to optimise their deposit mix while managing liability costs. By utilising foreign currency deposits—which often attract competitive interest rates—as a lever for credit expansion, lenders are able to enhance their advance-to-deposit ratios while diversifying funding sources.

The divergence between deposit-linked advances and overall credit growth highlights the increasing sophistication in banks' asset-liability management, even as regulators maintain vigilance over leverage metrics and credit quality across the system.