Banks are poised to save approximately ₹4,000 crore annually by raising deposits through FCNR(B) accounts, as the RBI covers hedging costs, making them cheaper than domestic fixed deposits. Industry experts anticipate $35-45 billion in FCNR(B) inf...
The RBI has allowed banks to raise FCNR(B) deposits for three-five year tenure between June 26 and September 30.
ET Intelligence Group: Banks are expected to save around ₹4,000 crore annually by raising deposits via Foreign Currency Non-Resident (Bank) FCNR(B) deposits compared with the term deposit route. With the RBI bearing the cost of hedging, FCNR(B) mode has become cheaper compared with three and five year fixed deposits. Industry experts estimate FCNR(B) inflows at $35-45 billion.
The prevailing three and five year fixed deposit rates lie between 6.3-7.1% including 50 basis points of additional rate for senior citizens. In comparison, FCNR(B) deposits attract a 6% rate, creating a funding cost advantage of about one percentage point. If banks mobilise $40 billion or ₹3.8 lakh crore through retail fixed deposits at 7%, their annual interest expense would be around ₹26,600 crore. At a 6% rate, it would fall to about ₹22,800 crore, translating into savings of roughly ₹3,800 crore a year. Funding Relief Expected inflows of $35–45 b to meet 12% of FY27 deposit accretion; overall deposit growth seen at 11–12% V Ramachandra Reddy, treasury head at Karur Vysya Bank, says that RBI's initiatives offer both direct and indirect benefits to banks, particularly those grappling with slower deposit growth and elevated credit-deposit ratios. "If inflows materialise as expected, the banking system could receive nearly ₹5 lakh crore of durable liquidity, providing meaningful balance sheet relief," said Reddy.
According to Madan Sabnavis, chief economist at Bank of Baroda, not all FCNR(B) mobilisation will translate into fresh dollar inflows, as part of the funds raised could come from the reallocation of existing NRI deposits. "Some NRIs may shift balances from their existing NRE and NRO accounts into FCNR(B) deposits to take advantage of higher foreign-currency deposit rates," said Sabnavis.
The FCNR(B) inflows may ease pressure on banks to mobilise deposits domestically. According to the RBI data, total bank deposits rose by 11% year-on-year to ₹260.8 lakh crore at the end of March 2026. Before the FCNR(B) announcement, analysts had projected deposit growth of 11-12% for FY27, implying an incremental deposit flow of around ₹31 lakh crore. Expected inflows of ₹3.8 lakh crore under FCNR(B) are equivalent to about 12% of the incremental deposits that banks may raise this year.
The RBI has allowed banks to raise FCNR(B) deposits for three-five year tenure between June 26 and September 30. Banks can swap the money into rupees while the RBI bears the entire hedging cost. Additionally, these deposits will be exempted from cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements, which allows banks to deploy the entire amount into earning assets instead of maintaining a portion in low-yielding regulatory reserves. This may support margins and improve balance-sheet efficiency.
