FCNR(B) Deposits Explained: Why India Faces a $160-170 Billion Repayment Question
FCNR(B) deposits brought India over $130 billion, but Uday Kotak says $160-170 billion must be repaid in 3-5 years. Here is what it means.
FCNR(B) deposits have become one of the biggest talking points in Indian banking this week. At Business Standard's BFSI Insight Summit on 26 October 2026, Uday Kotak of Kotak Mahindra Bank said India should prepare to repay roughly $160-170 billion, including interest, as these dollar deposits mature over the next three to five years. Bankers meanwhile described a record inflow that eased funding pressure. Both views can be true, and understanding why helps anyone who follows rates, the rupee or bank funding.
What FCNR(B) deposits are
FCNR(B) stands for Foreign Currency Non-Resident (Bank) deposit. It lets non-resident Indians and others park money in a foreign currency, such as dollars, with an Indian bank. The bank pays interest in that currency, and the depositor carries no rupee risk. Think of it as a loan from overseas savers to Indian banks, repayable in dollars on a fixed date.
How much came in
Different speakers quoted different figures, mostly because they measure different periods:
- Kotak said banks raised $132.98 billion through FCNR(B) deposits by 31 August, and total inflows under the broader facility reached $143.6 billion by 18 September.
- Public sector bank chiefs said banks mobilised a record $127 billion in July and August, against about $34 billion in the 2013 scheme.
- A separate Business Standard report on the summit said the RBI's concessional swap window mobilised nearly $133 billion from June to August.
- Axis Bank's CEO was reported citing about $14.3 billion, which looks like a different, narrower measure. We could not reconcile that number.
Bank-level figures reported include roughly $11 billion at SBI and about $8 billion at Bank of Baroda.
Why depositors came
The RBI's swap window covered the cost of hedging the currency risk, which PNB's Ashok Chandra said would otherwise be about 3-3.5% on dollar deposits. Banks also offered a leverage facility. SBI's representative said depositors could earn up to 7% with leverage versus 3.5-4% on typical dollar deposits, and that about 80% of SBI depositors used leverage, averaging around five times. Leverage here means borrowing against the deposit to place more money, which raises both returns and risk.
Why Kotak calls it insurance, with a bill
Kotak called the scheme a strong insurance policy against global uncertainty, but said it only postponed the underlying macro challenges. He credited the RBI for closing the window a month early, before US yields rose in September, and estimated the cost would now be at least 100 basis points higher. A basis point is one-hundredth of a percentage point.
The repayment point is simple arithmetic. Money borrowed for three to five years comes due in three to five years. Unless India's reserves grow, other inflows replace it, or depositors roll over, that money must be found.
What to watch
- Rollover behaviour. If depositors renew, the pressure eases.
- Current account. Kotak said the deficit was $26 billion last fiscal year against $72 billion of gold imports, and projected up to $90 billion of gold imports and a $60-65 billion deficit for FY27. These are his projections, not official forecasts.
- Bank controls. Banks said they did due diligence on fund sources; Indian Bank said about 90% of its depositors were known to it.
- Deposit rates at home. Banks said the effect on retail deposit rates is unclear.
Key takeaways
- Banks raised well over $125 billion through FCNR(B) deposits this year, with exact totals depending on the period measured.
- Kotak estimates $160-170 billion, including interest, will need repaying over three to five years.
- The inflow eased funding pressure now, but its true cost depends on rollovers, reserves and the current account.
Sources
- [Business Standard: FCNR(B) bought India 3-5 years, says Uday Kotak](https://www.business-standard.com/specials/bs-events/bfsi-insight-summit-2026-fcnr-b-bought-india-3-5-years-says-uday-kotak-1261026014511.html)
- [Business Standard: FCNR(B) not a short-term fix, say PSB chiefs](https://www.business-standard.com/specials/bs-events/bfsi-insight-summit-2026-fcnr-b-not-a-short-term-fix-say-psb-chiefs-1261026012711.html)
- [Business Standard: Rate hike outlook, funding costs put banks on guard](https://www.business-standard.com/specials/bs-events/bfsi-insight-summit-rate-hike-outlook-funding-costs-put-banks-on-guard-1261026015511.html)
- [Business Standard: Indian banks face tighter liquidity, says Axis Bank CEO](https://www.business-standard.com/specials/bs-events/indian-banks-face-tighter-liquidity-rising-risks-says-axis-bank-ceo-1261026004641.html)
Tags: FCNR(B) RBI rupee foreign exchange banking