Business · India Bureau
Foreign currency deposits lift Indian bank coffers amid margin headwinds
India's three largest private banks have mobilised over $127 billion through foreign currency non-resident deposits, bolstering their balance sheets even as analysts flag potential pressure on lending margins in the near term.
LSN India ·
HDFC Bank, ICICI Bank and Axis Bank have significantly strengthened their deposit base through aggressive tapping of the Foreign Currency Non-Resident (FCNR(B)) deposit scheme, according to market watchers tracking the sector's funding strategies. The collective mobilisation of more than $127 billion underscores lenders' focus on shoring up foreign exchange reserves and diversifying their deposit portfolio amid a competitive funding environment.
The FCNR(B) scheme, which allows non-resident Indians and persons of Indian origin to maintain deposits in foreign currency, has emerged as a critical funding avenue for major lenders navigating tight domestic liquidity conditions. Analysts attribute the robust inflows to attractive interest rate offerings and banks' strategic positioning ahead of the festive quarter.
While the deposit accumulation provides immediate balance sheet relief, market observers caution that margin compression risks persist in the near term. However, expectations are building that net interest margins—the spread between lending and borrowing rates—could stabilise or improve during the October-December quarter as banks recalibrate pricing strategies and benefit from a more diversified funding mix.
The deposit mobilisation also reflects broader industry trends as lenders seek to maintain adequate capital ratios and reduce their reliance on costlier domestic deposits. The move comes as the banking sector navigates evolving monetary policy signals and credit demand patterns across consumer and corporate segments.