RBL Bank shares rally 5%, hit 52-week high; lender mops up $3.4 billion from FCNR deposits

Shares of RBL Bank were trading with impressive gains in the morning trade on Thursday, September 3. The stock jumped as much as 5% to hit its 52-week high level of ₹409 on the NSE.

The stock was in the spotlight as the private sector lender on Wednesday said it has garnered $3.4 billion from foreign currency non-resident bank (FCNR-B) deposits up to August 31, the closure date of the concessional swap facility.

"Pursuant to Reserve Bank of India's swap facility for FCNR (B) deposits up to August 31, 2026, the deposit mobilisation by RBL Bank is $3.4 billion," the bank said in a regulatory filing.

Loans provided by the international banking unit of the bank against such deposits stand at $1.08 billion, it said.

The deposit mobilisation was also supported by the bank's promoter, Emirates NBD, and its subsidiaries/affiliates, leveraging the strong UAE and India corridor, it added.

Under the FCNR (B) scheme, banks offer attractive interest rates to mobilise foreign currency deposits. These are foreign currency-denominated fixed deposits, and both the principal and interest are repayable in the same foreign currency.

India attracted a whopping $127.23 billion in FCNR (B) deposits under the Reserve Bank of India's (RBI) special USD-INR forex swap facility till August 31, the closing date, which was advanced by a month following a robust response from the Indian diaspora.

The RBI's special USD-INR forex swap facility for FCNR (B) deposits, Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECBs) was launched on June 8 to attract foreign capital to stem the fall in the rupee against the dollar.

What analysts at CITI said following the fund-raise

CITI notes that the lender has capitalised on its promoter’s relationship with Emirates NBD to mobilise a disproportionately large pool of FCNR(B) deposits from the UAE corridor under the Reserve Bank of India’s special USD-INR swap facility.

According to its analysts, RBL Bank mobilised gross FCNR(B) deposits of around $3.4 billion (₹32,472 crore) under the facility. The investment firm said the amount is outsized for a mid-sized bank and accounts for around 26% of RBL Bank’s total deposits and 37% of its term deposits. The lender also has a 2.7% share of total FCNR(B) mobilisation, significantly higher than its overall systemic deposit share of over 0.5%.

CITI believes the mobilisation could have a meaningful impact on RBL Bank’s earnings. The investment firm estimates that the additional deposits could translate into an approximately 7% increase in absolute net interest income (NII) and a 10% increase in pre-provision operating profit (PPOP) in FY27.

However, the benefit is likely to come with near-term pressure on the bank’s reported net interest margin (NIM). CITI expects the enlarged balance sheet and relatively thin incremental margins on the FCNR(B) deposits to put around 40-45 basis points of pressure on NIM over the next two quarters. The impact is expected to be partly visible in the second quarter and more fully reflected in the third quarter.

CITI expects some of this pressure to be offset by NIM accretion from RBL Bank’s ₹26,000 crore equity infusion. Ultimately, it said the trajectory of RBL Bank’s NIM will depend on how quickly the bank deploys the additional deposits and how effectively it utilises the funds.