RBI's withdrawal of FCNR-B interest rate ceiling may boost banks’ deposit growth: Crisil Intelligence

Crisil Intelligence, in its report, has said that inflow of overseas funds backed by the measures taken place to boost foreign currency deposits, may provide incremental support to banks' deposit mobilisation in the current fiscal year (FY27).

It noted that the RBI's decision to withdraw the interest rate ceiling on fresh foreign currency non-resident (FCNR-B) deposits of three-five year tenors till September 30 provides banks greater flexibility to offer competitive rates, thereby supporting foreign currency deposit inflows.

Further, the contribution of the rest-of-the-world (ROW) segment, comprising non-resident deposits, to overall bank deposits is expected to witness a modest uptick in FY27, providing supplementary support to deposit growth. The share of ROW deposits declined to 6.2% in FY26 from 7.1% in FY19. Besides, it said that while household deposits remain the primary source of funding, the gradual diversification of the deposit base suggests that other segments may also contribute to deposit growth.

It pointed out that the broader banking system continues to face the challenge of strengthening liability franchises, with credit growth outpacing deposit growth. In FY26, the total deposits in India's banking sector grew 13.5% year-on-year to around Rs 262 trillion, while the system-level credit-deposit ratio remained above 81%.

SBI Research estimated that the FCNR(B) swap facility could bring in $40-45 billion.

It added that the deposit balance remains concentrated, with the top 10 states accounting for around 76% of system deposits as of March 2026, broadly unchanged from March 2019. Maharashtra accounts for 23% of total system deposits, followed by Delhi, Karnataka, Uttar Pradesh and Tamil Nadu.