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FCNR(B) Liquidity Squeezes Bank Margins, Boosts NBFCs: Nuvama Report
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News18•29-09-2026, 11:30
FCNR(B) Liquidity Squeezes Bank Margins, Boosts NBFCs: Nuvama Report
- •Banks with higher FCNR(B) mobilization may face sharper margin pressure in Q2FY27, according to a Nuvama report.
- •Increased banking-system liquidity from FCNR(B) deposits is a key near-term catalyst, initially replacing bulk deposits and parking funds.
- •This liquidity is expected to eventually flow into lending, supporting systemic credit growth.
- •NBFCs are poised to benefit from additional banking system liquidity, potentially containing funding costs and cushioning margin impacts.
- •Nuvama anticipates improved liquidity to significantly boost credit growth and ease funding costs in FY27, while insurance commission capping could impact earnings from FY28E.
Key Questions Answered
Banks with higher FCNR(B) mobilisation could experience sharper margin pressure in 2QFY27, while increased banking-system liquidity is expected to help contain funding costs and cushion margins for NBFCs.
Most banks are preparing to transition to the Expected Credit Loss (ECL) framework starting from April 1, 2027, which could increase annualised credit costs by 10 to 20 basis points.
Nuvama highlights the potential impact of the proposed insurance commission capping on fee income, which is expected to emerge as a major earnings headwind predominantly from FY28.
