Mumbai, Oct. 5 -- Deposit mobilisation by private banks outpaced state-owned peers in the second quarter of FY27, indicating higher Foreign Currency Non-Resident Bank deposit mobilisation under the Reserve Bank's concessional swap window.
Data compiled from provisional numbers disclosed by banks for the Q2 FY27 shows that private lenders' deposit growth ranged between 17 per cent and 34 per cent year-on-year against a 6.87-17.01 per cent rise of state-owned lenders.
In the private space, HDFC Bank reported an 18.8 per cent year-on-year deposit growth in Q2, Kotak Mahindra Bank (23.2 per cent), YES Bank (19.5 per cent), Axis Bank (20.7 per cent), IDFC First Bank (17 per cent), RBL Bank (34 per cent) & South India Bank (18.70 per cent).
In the PSB space, Bank of Baroda registered the highest growth of 17.01 per cent year-on-year in domestic deposits and 16.75 per cent in global deposits in Q2 FY27, followed by Central Bank of India (14.43 per cent), UCO Bank (14.05 per cent), and Punjab and Sind Bank (12.98 per cent).
Punjab National Bank reported 9.90 per cent year-on-year growth in global deposits and 9.44 per cent in domestic space. Canara Bank's global deposits grew 13.13 per cent, and domestic deposits rose 10.96 per cent.
Indian Bank and Union Bank of India's total deposits grew 12.4 per cent and 6.87 per cent, respectively.
"System deposit growth picked up from 11-12 per cent to 17 per cent year-on-year with strong FCNR(B) inflows of $133 billion, which accounted for 4.5 per cent of system deposits," Motilal Oswal Financial Services said in a report.
The Reserve Bank of India's special USD-INR forex swap facility for FCNR (B) deposits, Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECBs) was launched on June 8, 2026. The scheme was open till August 31 for FCNR(B) deposits, and will be open until December 31, 2026, for ECBs and OFCBs.
As of August 31, banks have mobilised $133 billion through the special Foreign Currency Non-Resident (FCNR-B) deposit scheme.
FCNR(B) deposits are fixed-term deposits held in foreign currencies, with the principal and interest repaid in the same currency, shielding depositors from direct rupee exchange-rate risk. The arrangement allows non-resident Indians to place foreign-currency funds with Indian banks without taking direct rupee-currency risk.
From a loan growth perspective, state-run banks' advances growth remained in the range of 12.59-29.83 per cent year-on-year in Q2, while private banks' growth ranged from 16.3-40 per cent during the same period.
Motilal Oswal said systemic credit growth remained healthy at 18.8 per cent as of September 15, 2026, driven by sustained retail demand and higher utilisation levels by MSME borrowers, healthy corporate borrowings due to elevated bond yields, and higher-than-expected FCNR(B) flows supporting the growth momentum.
The report further said net interest margins (NIMs) for private banks are expected to be adversely impacted by rapid business growth owing to FCNR(B) inflows and the leverage provided by the banks against the same.
"NIMs are expected to gradually improve as banks deploy the funds for lending and retire high-cost liabilities," the report added.
Published by HT Digital Content Services with permission from Millennium Post.