Stories
FCNR-B inflows boost Q2 bank growth while core deposits remain soft
- •Indian banks reported stronger loan and deposit growth in the September quarter, largely lifted by FCNR-B inflows according to a Jefferies report.
- •Headline growth numbers were partly supported by foreign-currency deposits, masking more moderate underlying trends at several large private lenders.
- •Banks utilized FCNR-B deposits to repay high-cost borrowings and certificates of deposit, thereby improving their Liquidity Coverage Ratios.
- •Axis Bank, Kotak Mahindra Bank, IDFC First Bank, and HDFC Bank all showed significantly lower adjusted growth rates after excluding the FCNR-B impact.
- •The report also highlighted continuing weakness in low-cost Casa deposits, while gold and corporate working capital loans continued to grow fast.
Key Questions Answered
Jefferies reported that FCNR-B inflows provided a noticeable lift to headline loan and deposit growth figures for Indian banks in the September quarter, though the underlying pace of deposit expansion remained softer after excluding these foreign-currency deposits. Banks partly utilized these inflows to repay high-cost deposits and improve their liquidity coverage ratios.
Axis Bank reported a year-on-year loan growth of 23 percent and deposit growth of 21 percent for the September quarter. After adjusting for the FCNR-B impact, Jefferies estimated the bank's actual loan growth at 19 percent and deposit growth at 12 percent.
IDFC First Bank utilized its FCNR-B deposits to repay existing deposits and certificates of deposit (CDs), which helped improve its liquidity coverage ratio (LCR) from 116 percent in June to 125 percent.
