New Delhi, Sept. 8 -- Banks' funding constraints have eased significantly following USD 136 billion in inflows through FCNR, external commercial borrowings (ECB) and overseas foreign currency bonds (OFCB), which have improved deposit availability and lowered funding costs, according to a report by Kotak Institutional Equities.

The brokerage expects the influx of deposits to put 10-30 basis points of near-term pressure on banks' net interest margins (NIMs) as the funds take time to be deployed into loans or used to repay higher-cost borrowings.

At the same time, Kotak said the deposits provide banks with greater flexibility in managing their funding. "These are high-quality liabilities that are SLR, CRR, LCR and PSL efficient, making the...