Bank deposits shrink as lenders cut high-cost bulk funds amid FCNR inflows

Bank deposits and credit contracted in the fortnight ended August 15, with aggregate deposits declining by ₹6,534 crore and bank credit by ₹70,639 crore, according to the latest data released by the Reserve Bank of India (RBI).

On a year-on-year basis, deposits grew by 14.7 per cent to ₹269.3 trillion, while loans expanded by 18.3 per cent to ₹220 trillion.

The contraction in deposits is particularly noteworthy given the significant inflows into foreign currency non-resident (FCNR) deposits following the RBI’s measures to make such deposits more attractive.

According to analysts, banks are reducing high-cost bulk deposits, which has resulted in a contraction in the deposit base.

“What I am thinking currently is that you are getting that FCNR money and retiring your wholesale deposits so that you can manage your costs. That is the only possible reason,” said an analyst at a rating agency.

Banks have mobilised $64.4 billion in FCNR(B) deposits till August 21 from the concessional swap facility, which was announced by the central bank on June 5, 2026. The swap window closes on August 31.

“Credit growth tends to fluctuate month-to-month and is often influenced by seasonal factors. At this stage, it does not appear to be a major concern,” said Sachin Sachdeva, vice president, sector head-financial sector ratings.

The credit-deposit ratio moderated slightly to 81.72 per cent as on August 15, compared with 81.96 per cent on July 31.