HDFC Bank Raises Nearly $12 Billion via FCNR-B Deposits Under RBI Swap Window
Key Takeaways
- •HDFC Bank raised nearly $12 billion via FCNR(B) deposits at a rate of 6.25% under the RBI's concessional swap window.
- •The dollar funds are aimed at lowering the bank's elevated credit-to-deposit ratio, which rose after the HDFC Ltd merger added loans without a matching deposit base.
- •Under the RBI facility, banks can swap FCNR(B) foreign currency funds into rupees at a concessional rate, mirroring a similar 2013 scheme.
- •The RBI's forex swap facility has drawn substantial interest across the banking system, with FCNR(B) deposits comprising a significant share of total mobilisation.
- •The effect of the inflows on HDFC Bank's CD ratio and deposit competition will be key indicators in its upcoming quarterly results.
HDFC Bank has raised nearly $12 billion through Foreign Currency Non-Resident (Bank) — FCNR(B) — deposits under the Reserve Bank of India's concessional swap window, with the deposits mobilised at a rate of 6.25%.
The move is expected to help lower the lender's elevated credit-to-deposit (CD) ratio, a key metric that compares a bank's loan book against its deposit base. A high CD ratio indicates that a bank is lending out a large share of the deposits it has gathered, which can pressure liquidity and funding costs. For the banking system as a whole, deposit growth has trailed credit growth in recent years, prompting banks to chase bulk and retail deposits at higher rates — a dynamic that the RBI's swap window is designed to relieve by opening an alternative dollar funding channel.
FCNR(B) deposits are term deposits maintained by non-resident Indians in permitted foreign currencies such as the US dollar. Under the RBI's swap facility, banks can swap the foreign currency funds raised through such deposits into rupees with the central bank at a concessional rate, providing banks an incentive to attract dollar inflows while managing currency risk. The facility echoes a similar RBI scheme introduced in 2013, when a FCNR(B) swap window was used to attract dollar inflows amid pressure on the rupee.
The development comes as the RBI's forex swap facility has drawn substantial interest across the banking system, with FCNR(B) deposits making up a significant share of the total mobilisation (read the related report).
HDFC Bank's elevated CD ratio has been a focal point for the lender following the merger of HDFC Ltd, the erstwhile housing finance company, into the bank, which added a large loan book without a matching deposit base. Raising dollar funds through the swap window is aimed at easing that imbalance. How quickly the fresh inflows translate into a lower CD ratio — and whether deposit competition among banks eases as a result — will be among the indicators to watch in the bank's upcoming quarterly results.
Source: CNBC-TV18
