FCNR(B) deposits credit positive for Indian banks - Moody's
This story was originally published at 22:54 IST on 9 September 2026
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--Moody's: FCNR(B) deposits credit positive for India banks
--Moody's: Large FCNR(B) inflow to reduce competition for domestic deposits
--Moody's:Large FCNR(B) inflow to help India bks replace higher cost funding
--Moody's: Benefit of FCNR(B) deposits on India bks to vary
--Moody's:RBI swap schemes rebuilt external buffers, eased currency pressure
--Moody's:See India bks loan growth 13-15% FY27, excluding FCNR-linked rise
--Moody's:See India bks deposit growth 10% FY27, excluding FCNR-linked rise
--Moody's:See India bks deposit growth 15% FY27, including FCNR(B) deposits
--Moody's: See India bks loan-to-deposit ratio 82-83% FY27 vs 81.4% FY26
--Moody's: Large FCNR(B) inflow improves funding stability
--Moody's:Large FCNR(B) inflow adds refinancing, maturity-concentration risks
--Moody's: FCNR(B) deposits likely to initially dilute NIMs of India banks
--Moody's: NIM pressure for bks to ease as FCNR(B) deposits used for lending
--Moody's: See India banks' LCR to rise above 130% in the near term
--Moody's: Rise in India banks' LCR is credit positive
MUMBAI – Inflows through foreign currency non-resident (banks) deposits under the Reserve Bank of India's special swap facility are credit positive for Indian banks because it supplements deposit mobilisation and will help contain the rise in banks' loan-to-deposit ratios, Moody's Ratings said in a sector comment. Banks garnered $127.23 billion through the FCNR(B) swap facility between Jun. 8 and Aug. 31, according to the data released by RBI.
The deposits are also likely to reduce competition among banks for domestic deposits and allow some banks to replace higher-cost wholesale funding, the rating agency said. The RBI's other swap facilities – for external commercial borrowings by public-sector companies and offshore foreign currency borrowings by banks – helped rebuild external buffers and eased pressure on the rupee.
Excluding the one-time increase in FCNR(B) deposits and loans backed by these deposits, Moody's expects Indian banks' loans to grow 13–15% in 2026-27 (Apr-Mar) and deposits to grow around 10%. "If FCNR(B) deposits are Included, it would lift total deposit growth to around 15%," Moody's said.
Deposit-backed lending is likely to account for the majority of FCNR(B) deposits, leaving a net FCNR(B) funding benefit of INR 2 trillion–INR 5 trillion. This would keep Indian banks' loan-to-deposit ratio at 82–83% in FY27, compared with 81.4% in FY26, Moody's said. "The deposits' longer tenor improves funding stability but creates refinancing and maturity-concentration risks because a significant volume was mobilised within a short period," it said.
The FCNR(B) deposits are likely to initially dilute the net interest margins of banks as some inflows will remain in cash or lower-yielding liquid assets, Moody's said. "We expect this pressure to moderate as banks deploy funds into higher-yield loans." The rating agency said it expects Indian banks' aggregate liquidity coverage ratio to rise above 130% in the near term as they initially retain some inflows in high-quality liquid assets and this improvement in banks' near-term liquidity is credit positive. End
US$1 = INR 95.1050
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Nandini Sinha
Edited by Deepshikha Bhardwaj
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