New Delhi, Sept. 29 -- Banks with higher FCNR(B) mobilisation could face sharper margin pressure in the second quarter of FY27, while increased banking-system liquidity could help contain funding costs and cushion margins for NBFCs according to a report by Nuvama.

According to the report, the Foreign Currency Non-Resident (Bank) deposit (FCNR(B)-driven liquidity has emerged as a "key near-term catalyst" for the banking sector.

Banks are currently using much of the additional liquidity to replace bulk deposits and park surplus funds with the RBI or in government securities.

However, "this liquidity will eventually find its way into lending, providing further support to systemic credit growth," Nuvama noted in its report.

Accordingly, "...