How to Ride Potential Success of FCNR-B; NBFCs & Small Pvt Bks To Gain More

Research evidence excerpt

How to Ride Potential Success of FCNR-B; NBFCs & Small Pvt Bks To Gain More

WPI to CPI, when the latter was as high as 10-12%. That's why liquidity stayed in deficit FCNR-BFCNR-B DepositDepositSchemeMobilisation2013 26 9% 2.4%

FCNR-B Deposit Scheme 2026 (est.)and rates and yields stayed higher. This time, core inflation in CPI terms (ex of the impact of 3.1% Scenario-1: Lower end of est. range 50 7% 1.8% 2.2%

WA conflict) is much lower than 2013, even though the RBI's estimate of 5-6% over next 9 . Scenario-2: Higher end of est. range 70 10% 2.5% 3.1%

Source: RBI, Company, Jefferies

months is higher than its comfort level of 4% (+/- 2ppt). Hence, we feel that unlike 2013, the

inflow of FCNR-B & ECB deposits will lead to easing of liquidity and rates even as RBI manages Exhibit 2 - NBFCs OPF when liquidity improves

short-term excessive surplus liquidity through OMO/ Reverse Repo instead of a CRR hike. & rates fall

Valn of Banks vs NBFCs (P/ABV) across rate cycles

Avg. Large Banks Avg. Large NBFCs 3yr AAA Corp Bond Yield (%, RHS)

Lenders benefit: NBFCs and smaller banks gain more than large private banks. Post the WA 5 (1) (2) (3) (Now) 11

conflict in late Feb-26, Indian financials initially underperformed the broader market, but have 4 109

reversed this trend over the past ~2 weeks, supported by RBI’s FCNR-B scheme announcement 32 87

5and easing of geopolitical tensions. In this period, Nifty Bank declined ~4%, broadly in line 6 0 4

with the Nifty, while the Nifty Financials Index UPF slightly (-5%) and NBFCs held-up better Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-23 Jun-24 Jun-25 Jun-26

.

(+1%). However, NBFCs underperformed banks in early 2026 (pre-WA conflict), reflecting the Source: Bloomberg, Company, Jefferies; Large banks include