Indian banks are surpassing expectations in attracting foreign currency deposits, driven by strong demand from non-resident Indians and favourable schemes, boosting lenders’ stability and funding options amid intense domestic competition.
Indian banks are drawing foreign currency deposits at a faster pace than many had planned, with executives saying demand has been strong enough to lift several lenders towards or beyond their internal targets. Speaking at the FICCI-IBA Banking Conference in Mumbai, Indian Bank chief executive Binod Kumar said the Chennai-based lender had जुटoned $1.2 billion in Foreign Currency Non-Resident, or FCNR(B), deposits and was still aiming for $2 billion. Central Bank of India, meanwhile, said it had already raised $250 million, well above its July goal, and was on course to reach $400 million, according to chief executive Kalyan Kumar.
The momentum has been helped by a Reserve Bank of India scheme that lets banks tap overseas Indian deposits and swap them with the central bank at no hedging cost until September 30. By July 31, the RBI’s special measures had brought in $40.81 billion in foreign exchange, with FCNR(B) deposits accounting for $36.72 billion of that total, according to the figures cited by ET Bureau. That comfortably exceeds the $26 billion raised under a similar initiative in 2013 and suggests the current campaign has found a stronger response from non-resident savers.
The rush has not been limited to Indian Bank and Central Bank of India. State Bank of India, the country’s largest lender, said last week it had already mobilised nearly $6 billion through FCNR(B) deposits and expects to raise $10 billion in all. Its pricing includes 6% on five-year deposits above $1 million and 5.75% below that threshold, while three-year deposits are priced at 5.50% and 5.25% respectively. Indian Bank is offering 6% on three-year deposits up to $1 million and 6.50% on five-year deposits up to that level, while Central Bank of India is offering 6.50% for three-year money and 6.60% for five years.
Other lenders are also using the window to broaden their funding mix. Bank of India is targeting $1.2 billion in FCNR-B deposits and plans to add another $2 billion through overseas borrowings, after already taking in about $200 million, according to earlier reporting by The Economic Times. The lender has said the move should help lower funding costs. For banks, the appeal is straightforward: foreign currency deposits can provide a comparatively stable source of dollars at a time when competition for domestic funding remains intense.
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