FCNR(B) Deposits Reach $10 Billion but Inflows Slow Amid Rising Costs
The Reserve Bank of India's special FCNR(B) deposit scheme has helped banks raise nearly $10 billion, but the pace of inflows has moderated after an initial surge. Banking officials attribute the slowdown to rising dollar funding costs and higher bond yields in the US and Europe, exacerbated by the ongoing West Asia conflict.
In June, the RBI clarified that banks could extend loans against FCNR(B) deposits, which initially boosted collections. However, the subsequent 25–40 basis point increase in dollar funding costs and a rise in global bond yields have made further mobilisation less attractive. One banking source noted, "There's doubt whether the estimated $50–70 billion flow will materialise in the wake of tight conditions, but flows will pick up when funding costs and bond yields come down."
Finance Minister Nirmala Sitharaman recently met with bank MDs and CEOs, urging enhanced outreach to non-resident Indians (NRIs) to sustain momentum. Despite current challenges, officials expect inflows to accelerate in the coming months if global financial conditions ease.
