Banks - India: RBI policy tailwind: Deposit accretion, lower CoF, treasury upside

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Banks - India: RBI policy tailwind: Deposit accretion, lower CoF, treasury upside

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Banks - India

RBI policy tailwind: Deposit accretion,

lower CoF, treasury upside

Industry Overview

FCNR deposits mobilization likely to be >US$25bn 09 June 2026

RBI has outlined a set of measures to boost foreign inflows, including full hedging cost Equity

support for FCNR(B) deposits (ahead of expectations) and a fixed-cost swap window India

(~1.5%) for ECBs by PSUs and OFCBs by banks. We expect meaningful accretion in Banks

FCNR deposits (>US$25bn) along with increased foreign borrowings at competitive Madhur Sharma >>

costs. Overall, this is a net positive for the banking sector, likely supporting deposit Research Analyst

growth and easing cost of funds over the next 2–3 quarters. HDFC is likely to be the BofAS+91 22India6632 8945

largest beneficiary, followed by ICICI, SBI, other large private banks, and select PSBs. madhur.sharma2@bofa.com

Strong FCNR policy support, but lower rate differential

Under the FCNR(B) scheme, RBI will bear the full hedging cost for deposits of 3–5 year

tenor, along with CRR/SLR exemptions. This materially enhances the attractiveness of

FCNR - Foreign Currency Non-

such deposits for banks amid tight system liquidity.

Resident (Bank) deposits

In 2013, RBI had implemented a similar scheme with hedging support, resulting in

~US$26bn mobilisation (~2.5% of system deposits). In contrast, the 2022 measures ECB – External Commercial

included CRR/SLR exemption without hedging support, which led to modest FCNR- Borrowings

deposit mobilization (~US$3bn), partly reflecting weaker deposit demand. Despite the

OFCB – Overseas Foreign Currencystrong policy push, two key differences vs 2013 remain: (1) USD-INR rate differential