Home / Business and Economy / FCNR Deposits: Profit Bonanza for Banks?
FCNR Deposits: Profit Bonanza for Banks?
20 Sep
Summary
- FCNR(B) deposits may yield Rs 5 trillion profit for banks.
- Scheme could add Rs 50,000 crore to RBI's balance sheet.
- Report refutes earlier estimates of significant financial losses.
SBI Research projects that FCNR(B) deposits could yield a notional profit of approximately Rs 5 trillion for banks over five years. This scheme may also add about Rs 50,000 crore to the Reserve Bank of India's balance sheet, challenging previous assessments of substantial financial losses. The report highlights that the mobilized USD 127 billion can bolster bank credit and generate interest income exceeding deposit payouts.
The analysis dismisses earlier loss estimates of around Rs 5 trillion as fallacious, arguing they double-count exchange-rate exposure. SBI Research clarifies that the reported loss combines additional interest costs and foreign exchange depreciation costs, while currency exposure is hedged via a special USD-INR swap facility. This liquidity is expected to support credit demand amidst outflows, with prudent risk management in place.
