FCNR(B) inflows to boost Indian bank liquidity and festive lending

Increased inflows through Foreign Currency Non-Resident Bank (FCNR(B)) deposits are expected to boost liquidity within the Indian banking system, potentially supporting consumer demand during the upcoming festive season.

Speaking at the Global Fintech Fest in Mumbai, former Standard Chartered Bank MD Sanjeev Mehta noted that banks are incentivized to deploy these funds to avoid the high costs of holding idle deposits, which can reach 9.5-10 per cent including hedging expenses. This liquidity could facilitate lending for consumer durables, such as mobile phones and refrigerators, during peak spending months.

Mehta emphasized that increased liquidity does not inherently raise lending risks, provided that financial institutions continue to adhere to their established internal credit standards and risk-management frameworks.