₹3.4 Lakh Crore of FCNR Deposits, and Most of It Was Borrowed
Between June and August, the RBI ran a swap window that made foreign-currency FCNR(B) deposits attractive for banks to raise. Seven private banks have now disclosed what they took in. The five that give rupee amounts raised about ₹3.36 lakh crore. Their own filings show that roughly 70% of it was matched by loans against the same deposits, or by guarantees for such loans. IDFC First Bank says plainly that the money it lent to NRI customers "was in turn booked as FCNR (B) deposits".
What each bank disclosed
From each bank's Q2 update, ₹ crore (banks' own conversions):
| Bank | FCNR(B) deposits | Loans against them | Standby LCs for other banks' loans | Matched (our arithmetic) |
|---|---|---|---|---|
| HDFC Bank ([HDFC]) | 1,10,340 (US$11.5 bn) | 54,770 (US$5.7 bn) | 29,340 (US$3.1 bn) | ~77% |
| Axis Bank ([AXIS]) | 1,01,800 (US$10.62 bn) | 43,800 (US$4.57 bn) | 44,900 (US$4.69 bn) | ~87% |
| Kotak Mahindra Bank ([KOTAK]) | 55,344 (US$5.78 bn) | 16,110 (US$1.68 bn) | not stated | ~29% |
| IDFC First Bank ([IDFC]) | 34,390 (~US$3.6 bn) | 24,885 (~US$2.6 bn) | not stated | ~72% |
| IndusInd Bank ([IIB]) | 33,627 (US$3.51 bn) | 16,564 (US$1.73 bn) | 4,772 (US$0.50 bn) | ~63% |
| Total, five banks | 3,35,501 | 1,56,129 | 79,012 | ~70% |
Yes Bank and RBL Bank also disclosed FCNR(B) money but give no rupee amounts ([YES], [RBL]). Our first piece covers what they said ([FCNR1]).
How the loans and deposits connect
The banks describe it in their own words:
- IDFC First: its overseas branch "had extended leverage of Rs. 24,885 crore (~US$ 2.6 bn) to NRI customers", and that money "was in turn booked as FCNR (B) deposits in the domestic Balance Sheet".
- Axis: loans "extended by the Bank’s international branches to customers as leveraging facility for placing such deposits".
- HDFC Bank, Kotak and IndusInd: loans "against" these deposits.
So the money went in a circle. A customer borrows dollars from the bank's overseas or GIFT City branch, places them as an FCNR(B) deposit in India, and the bank swaps the dollars with the RBI. The bank's deposits and its loans both rise, by much the same amount.
What it does to the headline numbers
Three banks published adjusted growth themselves. Axis and IDFC First exclude the matching loans; Yes Bank excludes all its FCNR(B) deposits:
| Reported | Bank's own adjusted figure | |
|---|---|---|
| Axis: gross advances, year | +22.7% | +18.8% |
| Axis: total deposits, year | +20.7% | +17.0% |
| IDFC First: total deposits, year | +25.9% | +17.0% |
| IDFC First: gross advances, year | +29.9% | +20.4% |
| Yes Bank: deposits, year | +19.5% | +13.2% |
IDFC First adds that the inflow left it with surplus liquidity, so it "slowed down deposit growth and reduced Certificate of Deposits". Axis says it used some of the flows "to reduce non-retail term deposits", which fell 8.6% in the quarter.
Moat and margin
Focus moat: cost advantage. A bank's funding edge is cheap, sticky current and savings (CASA) money. Matched FCNR(B) deposits are a different thing:
- they exist because the bank lent the money in the first place;
- they came through a window that closed on 31 August;
- they can leave when the deposits and loans mature.
The CASA ratios tell the same story:
| Bank | CASA ratio, reported | Without FCNR(B) |
|---|---|---|
| IDFC First | 47.6% | 51.3% |
| Yes Bank | 30.0% | 31.7% |
The margin question. None of the filings gives the rates or swap terms. The Q2 results will show whether this was profitable arbitrage or mostly balance-sheet size.
MoatSCOREs (as published on the Moat Screener, 6 Oct 2026 ([MS])):
| Bank | MoatSCORE |
|---|---|
| HDFC Bank | 6.04 |
| Kotak Mahindra Bank | 6.03 |
| IDFC First Bank | 5.91 |
| RBL Bank | 5.65 |
| Yes Bank | 5.60 |
| Axis Bank | 5.14 |
| IndusInd Bank | 4.44 |
None has been re-scored for these updates.
The bear case
- Inflated growth. Headline deposit and loan growth at these banks includes a one-time, largely self-funded inflow.
- Unknown economics. No filing gives the cost of the deposits, the rate on the loans or the swap terms.
- Maturity cliff. When the deposits and loans run off, the balance sheets shrink back.
The case for
- Disclosure. All seven banks disclosed the window; several published growth without it themselves.
- Matched risk. Most of the deposits are backed by loans against the same deposits, so the credit risk on those loans is low.
- Liquidity used well. IDFC First and Axis used the inflow to cut costlier bulk and wholesale deposits.
What to watch
- Q2 results: the cost of these deposits, and the margin on the matched loans.
- Whether government banks, whose updates don't mention the window, report FCNR(B) inflows in their results.
- How fast these balances run off in the December quarter.
Sources
- [HDFC] HDFC Bank, Q2 FY27 business update, 4 Oct 2026 (NSE)
- [AXIS] Axis Bank, Q2 FY27 business update, 5 Oct 2026 (NSE)
- [KOTAK] Kotak Mahindra Bank, Q2 FY27 business update, 5 Oct 2026 (NSE)
- [IDFC] IDFC First Bank, Q2 FY27 provisional release, 5 Oct 2026 (NSE)
- [IIB] IndusInd Bank, Q2 FY27 key numbers, 5 Oct 2026 (NSE)
- [YES] Yes Bank, Q2 FY27 pre-results disclosure, 4 Oct 2026 (NSE)
- [RBL] RBL Bank, Q2 FY27 business update, 5 Oct 2026 (NSE)
- [FCNR1] Moat & Margin, HDFC Bank, Yes Bank, RBL: The RBI Swap Inside Q2 Deposit Growth
- [MS] Moat & Margin, Moat Screener and How MoatSCORE works
Educational research, not investment advice. Every figure above is drawn from the banks' own filings, read from the primary documents on 6 October 2026; totals and percentages marked as ours are our arithmetic. MoatSCOREs are as published on the Moat Screener. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.
Member discussion