Politics · India Bureau
Banks poised to tap ₹5 trillion profit from foreign currency deposits
Analysis suggests India's banking sector could unlock substantial earnings through the FCNR(B) scheme, leveraging an estimated $127 billion in foreign currency deposits to expand credit growth over the next five years.
LSN India ·
India's banks are positioned to generate significant notional profits by mobilising foreign currency deposits under the Foreign Currency Non-Resident (Bank) scheme, according to fresh research from SBI's in-house economics team.
The analysis indicates that approximately $127 billion in FCNR(B) deposits currently held with Indian banks could serve as a foundation to support ₹25 trillion in additional credit disbursement across the financial system. This expanded lending capacity would, in turn, yield approximately ₹5 trillion in notional profit for the banking sector over a five-year period.
The FCNR(B) scheme allows non-resident Indians and persons of Indian origin to maintain deposits denominated in foreign currencies with domestic banks, offering banks a stable source of foreign exchange resources while enabling depositors to earn returns without exposure to rupee fluctuations.
By channelling these foreign currency inflows into domestic credit expansion, banks can address the economy's growing financing needs while improving their profitability metrics. The scheme's potential to simultaneously strengthen foreign exchange reserves and boost bank lending highlights its strategic importance for India's financial sector and broader economic growth objectives.