Overview
- Provisional Q2 FY27 disclosures published on October 5 show system credit growth near 18% year‑on‑year and deposit growth about 17.3%, driven largely by roughly $133 billion of FCNR(B) foreign‑currency deposits mobilised under the RBI’s June 8–August 31 swap window.
- Major lenders reported their own mobilisation and placement details, with HDFC Bank citing about $11.5 billion mobilised and Axis Bank $10.62 billion, and both using overseas branches to extend loans and issue standby letters of credit against those deposits.
- When banks strip out FCNR(B) deposits and the loans international branches used to place them, headline deposit and loan growth fall sharply for some lenders, showing that part of the surge reflects placement mechanics rather than pure domestic retail flows.
- Analysts say the leverage and short‑term use of these foreign deposits is likely to weigh on private banks’ net interest margins in the near term, even as reported asset quality and provisioning remain broadly healthy and figures are still provisional pending limited auditor reviews.
- The episode highlights how the RBI’s swap window can sharply change banking system metrics and underlines risks to margin and funding durability if funds are not quickly redeployed to core domestic lending or used to retire higher‑cost liabilities.