Key facts
- The RBI has opened FCNR(B) and ECB swap windows to improve bank liquidity and stabilize the rupee.
- Banks are expected to save approximately ₹4,000 crore annually through FCNR(B) deposits due to lower interest rates and exemption from CRR/SLR.
- FCNR(B) deposits will attract a 6% interest rate, compared to 6.3-7.1% for fixed deposits.
- The RBI will bear the entire hedging cost for these FCNR(B) deposits.
- Inflows from FCNR(B) deposits are estimated between $35 billion and $45 billion.
- These inflows are expected to contribute about 12% of the incremental deposit growth banks anticipate for FY27.
Indian bank stocks surged following the Reserve Bank of India's (RBI) introduction of Foreign Currency Non-Resident (Bank) FCNR(B) and External Commercial Borrowing (ECB) swap windows. These measures are designed to boost liquidity, stabilize the rupee, and reduce funding costs for banks.
The FCNR(B) deposit window, open from June 26 to September 30 for three-to-five-year tenures, is expected to save banks approximately ₹4,000 crore annually. This saving arises because the FCNR(B) deposits offer a 6% interest rate, which is lower than the 6.3-7.1% rates on comparable fixed deposits. Furthermore, the RBI will cover the entire hedging cost associated with these deposits, and they are exempt from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements, allowing banks to deploy the full amount into earning assets.
Industry experts anticipate that these initiatives could lead to inflows of $35 billion to $45 billion. This influx of funds is projected to meet about 12% of the incremental deposit growth banks are expected to achieve in FY27, thereby easing pressure on domestic deposit mobilization. Total bank deposits had grown 11% year-on-year to ₹260.8 lakh crore by the end of March 2026, with analysts forecasting a similar growth rate for FY27.
Traders have responded positively to these developments, initiating bullish derivative bets and reversing prior bearish positions on bank stocks. V Ramachandra Reddy, treasury head at Karur Vysya Bank, noted that the RBI's initiatives provide direct and indirect benefits, potentially injecting nearly ₹5 lakh crore of durable liquidity into the banking system. However, Madan Sabnavis, chief economist at Bank of Baroda, cautioned that some of the FCNR(B) funds might come from the reallocation of existing Non-Resident Indian (NRI) deposits rather than entirely new inflows.