India’s banking system experiences a record surge in deposits, driven by the Reserve Bank of India’s foreign currency deposit scheme, attracting nearly $32 billion and surpassing the 2013 inflow levels, signalling a significant shift in overseas investment and funding capacity.
India’s banking system has seen a sharp rebound in deposits over the past three fortnights, with balances rising to a record high as the Reserve Bank of India’s special foreign currency deposit push draws in overseas money and converts dollars into rupees, according to a Reuters report citing central bank data.
Reuters said deposits climbed by a cumulative Rs 11 lakh crore in the three fortnights ended July 31, reversing a net fall of Rs 3.87 lakh crore between April 1 and June 15. That surge pushed total deposits to Rs 269.4 lakh crore at the end of July, up Rs 7.1 lakh crore in the first four months of the current financial year.
The turnaround follows the RBI’s June move to open concessional swap windows for foreign currency non-resident, or FCNR(B), deposits and to encourage banks and state-owned entities to raise cheaper overseas funds. RBI data showed the measures had attracted almost $41 billion by the end of July, while a trader at a state-run bank told Reuters that the conversion of dollars into rupees was the main driver of the deposit jump.
The inflows also appear to have gathered pace after an initially slow start. Business Standard reported that NRI deposit inflows weakened in April and May, with FCNR(B) deposits down sharply year on year in April, before the RBI’s special scheme began to bite. The central bank effectively absorbed hedging costs on the deposits, making them more attractive to savers abroad.
The latest mobilisation has already drawn comparisons with the RBI’s 2013 foreign currency drive. Mint reported that the current effort had brought in nearly $32 billion in foreign capital in a short period, with Governor Sanjay Malhotra saying FCNR(B) inflows had overtaken the 2013 tally of $26 billion in about 45 days. SBI Research, as cited by IBEF, has put the eventual inflow potential much higher, at as much as $85 billion, while another estimate cited in the market suggests the scheme could generate $90 billion to $95 billion of capital inflows in FY27.
For lenders, the deposit surge matters because it narrows the gap between loan growth and deposit growth, a tension that has weighed on the banking system over the past year. Higher deposit accretion should give banks more room to fund credit expansion without having to push deposit rates higher, helping ease pressure on funding costs. Large private and state-owned banks with extensive overseas reach are widely expected to benefit most.
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