SBI Targets $10 Billion in FCNR(B) Deposits by September, Says Deposit Drive Won't Dent Margins

State Bank of India (SBI), the country's largest public sector bank, disclosed during an analyst concall that it has already raised approximately $6 billion through Foreign Currency Non-Resident Bank (FCNR(B)) deposits and expects to reach a total of $10 billion by the end of September.

The bank indicated that the FCNR(B) inflows will not have a material impact on its profitability or funding costs, addressing analyst concerns that an aggressive deposit mobilization drive could compress net interest margins. The push comes against a backdrop of Indian banks facing sustained pressure to grow their deposit base, as credit growth in the banking system has continued to outpace deposit growth, prompting lenders to intensify retail and wholesale funding efforts.

SBI's mobilization drive also follows a regulatory measure by the Reserve Bank of India (RBI) in July 2024, which exempted incremental FCNR(B) and Non-Resident External (NRE) deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements for a limited period — initially through November 4, 2024, later extended — to encourage foreign currency inflows and support the rupee. The exemption removed a cost barrier that previously made such deposits less attractive for banks to aggressively pursue.

FCNR(B) deposits are term deposits maintained in permitted foreign currencies by non-resident Indians (NRIs) and are offered by authorized banks in India. The deposits are denominated in currencies such as the US dollar, the British pound, the euro, and the Japanese yen, and they carry fixed tenors ranging from one to five years. Because these deposits are maintained in foreign currency, the exchange risk is borne by the depositor, not the bank. This structure allows banks to access dollar and other hard-currency funding without adding direct currency exposure to their balance sheets.

SBI, headquartered in Mumbai, is the largest commercial bank in India by assets, deposits, and branches. As a public sector bank, it is majority-owned by the Government of India.

The disclosure came alongside SBI's recent first-quarter results and an analyst concall in which Chairman C.S. Setty expressed confidence in sustaining strong growth. SBI stated it has no immediate plans for capital raising. With the CRR/SLR exemption window set to remain available for a defined period, the pace of FCNR(B) mobilization across the banking sector — and whether other lenders announce similar targets — will be a metric analysts are likely to track in coming quarters.

Source: CNBC-TV18