India’s Foreign Currency Non-Resident (Bank), or FCNR(B), deposit scheme has thrown up a set of winners, and size alone did not determine who came out ahead. Brokerage reports from Macquarie, Jefferies, Motilal Oswal (MOSL) and BofA Securities, show that banks which leveraged their overseas balance sheets and offered the sharpest rate hikes captured a share of the $136.4 billion (~Rs 12.96 lakh crore) inflow far beyond their usual footprint in the deposit market.
Two reasons explain the rush of FCNR(B) money this year. As BofA Securities notes, “the RBI did not specify any fixed cost for the swap,” unlike the fixed concessional rate banks got last time, and Motilal Oswal points out that these deposits are “exempted from CRR and SLR requirements, making the scheme fairly attractive” for banks to mobilise aggressively. Banks then sweetened the deal further, hiking FCNR-B deposit rates by 200-300 basis points (from 3-4% to 6-7%) and layering on leverage from their overseas branches, a combination Macquarie says delivered “an immediate and sizeable funding benefit” even as it weighs on margins.
The Banks That Rode The Inflow
ICICI Bank was the standout among large private lenders. The bank mobilised $17.88 billion (~Rs 1.70 lakh crore) of FCNR(B) deposits, according to Macquarie, implying an 18% market share against a current deposit market share of just 7%. MOSL puts ICICI’s share slightly lower at 14%, still well ahead of its usual size. More than 70% of the bank’s mobilisation leverage came from its own balance sheet, comprising close to $9 billion (~Rs 0.86 lakh crore) in loans from its international branches and $3.6 billion (~Rs 0.34 lakh crore) in standby letters of credit issued to other banks, Macquarie noted.
RBL Bank, a smaller private lender, showed a similar pattern. The bank added $3.4 billion (~Rs 0.32 lakh crore), capturing a 2.7% share of the scheme, well above its normal deposit market share of about 0.5%, according to MOSL. State Bank of India mobilised close to $9 billion (~Rs 0.86 lakh crore) just before the window closed, ahead of its own $10 billion (~Rs 0.95 lakh crore) guidance.
FCNR(B) winners and where analysts are placing their bets.
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Foreign banks were the biggest relative gainers. According to Jefferies, foreign lenders’ share of FCNR-B deposits jumped from 1-2% as of early June to between 15% and 30% of incremental flows by end-July. HSBC alone captured roughly 22% of total inflows, mobilising $6.1 billion (~Rs 0.58 lakh crore) as of July 30 according to MOSL, and its overall share climbed further with $6.14 billion (~Rs 0.58 lakh crore) in incremental deposits by August-end per Jefferies’ bank-wise data. Standard Chartered added a further 7% share.
By contrast, HDFC Bank, India’s largest private lender by deposits, notably lagged its peers in the scheme relative to its size, mobilising just $1.4 billion (~Rs 0.13 lakh crore) by end-July according to MOSL, a fraction of ICICI’s haul despite a comparable deposit base.
ALSO READ: FCNR Deposits Beat Estimates, RBI To Pull Out Rs 6-7 Lakh Crore: Pranjul Bhandari
The liquidity windfall has already shown up in relative stock performance. NBFC (non-banking financial company) shares have gained 15% over the past three months and small private banks 11%, against 5% for large private banks and 2% for the Nifty 50, Jefferies data shows. The brokerage argues the improved system liquidity should disproportionately benefit NBFCs and smaller private banks going forward, even though FCNR(B) deposits carry lower margins than typical deposits. “Flows enhance liquidity ahead of festive season & may help keep rates lower,” Jefferies analysts Prakhar Sharma and Vinayak Agarwal wrote.
MOSL has raised its systemic credit growth estimate to 14.3% for FY27 (financial year 2026-27), flagging upside risk to as much as 15.5-16.0%, and named ICICI Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank (AU SFB) as its top picks tied to the trend. Jefferies rates ICICI Bank, HDFC Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank all Buy, with upside estimates ranging from 11% to 34% over a 12-month period.
Note: Rupee conversions are approximate, calculated at a flat rate of Rs 95 per US dollar for reference only.
FCNR(B) explained.
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