The special window for Non-Resident Indians (NRIs) to park funds in Indian banks through Foreign Currency Non-Resident (Bank) or FCNR(B) deposits received an overwhelming response, attracting around $133 billion in inflows at its closure on August 31, 2026.

According to data released by the Reserve Bank of India (RBI) on September 21, FCNR(B) deposits accounted for the bulk of the dollar-denominated capital inflows into Indian banks.

Overseas Foreign Currency Borrowings (OFCBs) and External Commercial Borrowings (ECBs) contributed another $5.3 billion each, taking the total inflow through these channels to $143.6 billion as of August 31.

The scheme was introduced by the RBI to support foreign exchange inflows and help contain pressure on the rupee.

The central bank’s last update on September 2 showed that banks had mobilised around $127 billion through dollar-denominated FCNR(B) deposits.

FCNR(B) deposits emerge as cheaper funding source for banks: BofA The large inflows have provided banks with a stable source of medium-term foreign currency funding at a time when lenders have been facing elevated credit-deposit ratios.

“Indian banks have recently operated with elevated credit-deposit ratios and increasing competition for deposits.

FCNR(B) inflows ease this constraint by providing sizeable medium-term funding.

These deposits have tenors of three to five years, improving funding stability and liability duration,” S&P Global said in a research note.

However, the inflows could have a marginal impact on banks’ profitability metrics.

A higher share of foreign currency deposits may put some pressure on Net Interest Margins (NIMs), as banks may have to pay relatively higher interest rates to attract these funds.

S&P expects any decline in margins to be offset by improved funding stability and returns generated from deploying these resources.

The FCNR(B) inflows also played a key role in supporting India’s external balance.

In July 2026, the deposits prevented the Balance of Payments (BoP) from slipping into a deficit of around $11.8 billion, according to estimates.

With NRI deposit inflows in July accounting for only about a quarter of the total mobilisation, the deposits are expected to have provided similar support to the BoP position in August.

FCNR(B) deposits saved India from a BoP deficit in July 2026 However, S&P caution that the inflow surge is unlikely to be repeated at the same scale in the future.

The eventual maturity of these deposits between 2029 and 2031 could create refinancing challenges, particularly for smaller banks.

“Banks face refinancing and repricing pressure when deposits mature in 2029-2031, if they make up a sizable portion of overall deposits.

Banks with a strong franchise should be able to refinance, but weaker ones could face a refinancing squeeze,” S&P Global added.