The report said the central bank has introduced special facilities for Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits and external commercial borrowings (ECBs), enabling banks to access overseas funds at lower costs.
These steps are aimed at attracting foreign capital, improving resource mobilisation and easing liquidity conditions in the banking system.
It noted that banks could benefit from a 200–250 basis point reduction in borrowing costs through the ECB route under the concessional swap framework, which is expected to support credit growth and improve funding efficiency.
The report added that the current policy approach is similar to the 2013 initiative, which led to FCNR(B) inflows of about $27 billion and overall NRI deposit inflows of around $34 billion. That programme also supported forex reserves and contributed to currency stability.
FCNR(B) deposits currently account for about 1.2% of total banking system deposits, indicating significant headroom for growth. The report said banks have already started increasing FCNR(B) deposit rates across key maturities, improving the attractiveness of these instruments for non-resident Indians.
According to Motilal Oswal Financial Services, lenders with strong retail franchises and established overseas networks are likely to capture a larger share of incremental inflows. The structure of the scheme also benefits both depositors and banks, encouraging wider participation.
The report said the measures come at a time when foreign institutional investor outflows and currency volatility have weighed on sentiment. Higher foreign currency inflows and stronger reserves are expected to support rupee stability and improve investor confidence.
It estimated that the dollar/rupee could strengthen towards the 93–94 range in the near term as inflows pick up pace. It also noted that FCNR(B)-linked funding offers banks a spread advantage of around 60–65 basis points over conventional wholesale deposits, due to exemptions from CRR and SLR requirements.
Motilal Oswal Financial Services said the RBI’s initiatives are likely to support credit growth, strengthen bank balance sheets and improve system liquidity, creating a supportive backdrop for the banking sector in the coming quarters.
