India Banks "RBI permits leverage for FCNR(B); positive for banks" Srivastava

Research evidence excerpt

India Banks "RBI permits leverage for FCNR(B); positive for banks" Srivastava

Global Research

23 June 2026ab

India Banks Equities

IndiaRBI permits leverage for FCNR(B); positive for

banks Banks

Alok Srivastava

Analyst

alok.srivastava@ubs.com

Deposit/credit growth could tick up; large banks to benefit more +91-22-6155 6037

In its FAQs, the RBI clarified that Indian banks can extend loans to non-residents or issue Yash Agarwal

SBLCs in favour of overseas lenders against FCNR(B) deposits. That implies banks can Analyst

lever up original deposits under the scheme on their own overseas balance sheets or yash.agarwal@ubs.com

with partner banks. Many banks were waiting for the FAQs from the RBI before ramping +91-22-6155 6007

up deposits under the FCNR(B) scheme. Most banks have announced rates between Karan Paresh Trivedi

5.25-7.1% under the scheme, materially higher than 2.9-3.75% previously. In the prior Associate Analyst

scheme of 2013, US$28bn, or 2.4% of system deposits, was mobilized under the karan.trivedi@ubs.com

scheme. A similar mobilization would imply US$66bn in deposits under the scheme and +91-22-6155 6177

temporarily boost system deposit growth toward the mid-teens. However, system credit

growth is likely to pick up with a lag, as overseas leveraging would not show up in

domestic system credit growth and increased deposit growth would gradually get

deployed in credit. Other than increased deposit and credit growth, fee income could

see an uptick, along with easing domestic bulk term deposit rates and banking liquidity.

During 2013, the highest acceleration in deposit growth under the scheme was at HDFC

Bank, followed by SOE banks. Smaller private banks lagged in deposit growth. We view

this as particularly positive for HDFC Bank, SBI and ICICI Bank.