Bank of India has raised approximately $2.33 billion through the FCNR(B) deposit scheme to replace high-cost domestic bulk deposits. This funding provides a stable liquidity cushion to support the bank's lending operations for roughly one quarter. Investors may monitor how this strategic shift impacts the bank's cost of funds and profit margins in the upcoming quarters.
Bank of India has successfully mobilized about $2.33 billion, equivalent to roughly ₹20,000 crore, through the Foreign Currency Non-Resident Bank (FCNR(B)) deposit scheme. This capital injection is part of a strategic effort to replace expensive domestic bulk deposits with more stable, long-term foreign currency funding. The bank estimates that this influx provides enough liquidity to sustain its lending activities for approximately one quarter.
Maintaining Credit Growth Targets
Despite the surplus liquidity circulating in the Indian banking system, which was estimated at around ₹10.43 lakh crore mid-September, Bank of India is maintaining a disciplined approach to balance sheet management. The bank confirmed it will stick to its annual credit growth target of 15% to 17%. By tapping into the FCNR(B) window, the bank is diversifying its funding sources rather than relying on short-term, volatile borrowings to fuel loan expansion.
The mobilization was supported by a special concessional swap window provided by the Reserve Bank of India, which helps absorb some of the hedging costs for the principal amount. This initiative has made foreign currency borrowing a more attractive option for lenders compared to traditional domestic avenues.
Managing Costs and Currency Risks
For investors, the move highlights the bank's focus on managing its cost of funds. While FCNR(B) deposits offer a stable funding base, they introduce certain risks that the bank must manage. The most significant is sensitivity to rupee depreciation. Because these liabilities are in foreign currency, the bank faces potential pressure if the rupee weakens significantly, as the cost of servicing interest payments could rise in domestic terms. Furthermore, the bank must ensure that the interest rates offered on these deposits remain competitive without squeezing its net interest margins.
Looking ahead, Bank of India is reportedly exploring further fundraising of up to $1 billion through overseas foreign currency borrowings (OFCB) by December 2026. This potential move aims to capitalize on existing hedging subsidies offered by the central bank.
The key monitorable for investors in the coming quarters will be how these foreign currency liabilities interact with domestic loan yields. The market will likely look for updates in future financial results regarding whether this shift to cheaper, stable funding effectively protects the bank's profit margins against the backdrop of fluctuating currency valuations and credit demand.