CONNECT WITH US
Fintech

Fintech

Have FCNR(B) deposits fuelled a surge in loans against fixed deposits?

ET BFSI Fintech logo

Published on

Add as a preferred source on Google
Have FCNR(B) deposits fuelled a surge in loans against fixed deposits?

The RBI had clarified in June that banks could lend against FCNR(B) deposits mobilised under the special facility, leaving the extent of leverage to individual lenders. Some banks offered leverage of several times the underlying deposit, allowing customers to borrow against the deposit and redeploy the funds into FCNR(B) deposits.

Loans against fixed deposits surged 43.2% year-on-year to Rs2.04 lakh crore in August, their fastest growth in more than three years. The surge coincided with $132.98 billion of FCNR(B) deposits mobilised under the RBI’s special forex swap facility, although the exact FCNR(B) contribution to loans against deposits cannot be established from RBI data. S&P Global Ratings estimates banks’ balance sheets could expand by $190 billion-$220 billion if 50-75% of the $127 billion FCNR(B) deposits raised between June 8 and August 31 are leveraged through loans against pledged deposits. FCNR(B)-backed loans provide banks with a capital-efficient lending channel, but their low spreads of around 25-50 basis points could dilute net interest margins.

04 lakh crore in August, marking their fastest growth in more than three years, as banks began reflecting a sharp increase in lending against deposits following the Reserve Bank of India 's special FCNR(B) deposit mobilisation scheme. 04 lakh crore in August, an increase of about Rs42,750 crore in a month. 43 lakh crore in August 2025. Growth was last higher in June 2023, when advances against fixed deposits rose 47% year-on-year.



Source link
Related Topics:Fintech

Disclaimer

We strive to uphold the highest ethical standards in all of our reporting and coverage. We TheMorningPulse.fyi want to be transparent with our readers about any potential conflicts of interest that may arise in our work. It's possible that some of the investors we feature may have connections to other businesses, including competitors or companies we write about. However, we want to assure our readers that this will not have any impact on the integrity or impartiality of our reporting. We are committed to delivering accurate, unbiased news and information to our audience, and we will continue to uphold our ethics and principles in all of our work. Thank you for your trust and support.