Foreign Currency Non-Resident (FCNR) inflows could boost system deposit growth by ~3 percentage points (ppt) and loan growth by 3.7ppt, raising FY27 loan growth to 16 per cent, while easing money-market rates are likely to benefit weaker-liability-franchise banks and wholesale-funded NBFCs, IIFL Capital said.Highlighting that FCNR flows are running ahead of expectations, the brokerage noted that banks had mobilised $36.7 billion in fresh FCNR deposits as of July 31, surpassing $24.5 billion mobilised during the entire 2013 window, which represented 2 per cent of system deposits and 9 per cent of FCA.It stressed, "We expect FCNR flows to add ~3ppt to system deposit gr. (13.5 per cent in FY27E) and 3.7ppt to loan gr. (16.1 per cent)."According to IIFL Capital, the faster uptake reflects the more liberal 2026 framework, including principal swaps at par, implying zero hedging costs for banks versus 3.5 per cent annually in 2013, and the extension of eligibility to rollovers and renewals, rather than only fresh deposits."Assuming a similar mobilisation run-rate over the remaining two months, we expect total mobilisation to be around $80 billion," it said.Following the Foreign Currency Non-Resident (FCNR) announcement and relaxation for foreign portfolio investors (FPIs) in government securities, the Indian rupee has stabilised, while government security yields and money-market rates have eased by 20-65 basis points.At the same time, banking system liquidity has surged to ₹3.2 trillion and is expected to increase further with additional FCNR inflows by September 2026, although currency leakage and forward unwinds through March 2027 should largely offset the surplus, as per IIFL.As a result, the brokerage house expects the Reserve Bank of India (RBI) to deploy temporary liquidity withdrawal tool such as variable rate reverse repo (VRRR) operations, rather than permanent measures such as open market operation (OMO) sales or an incremental cash reserve ratio (CRR) hike."Easing of money market rates bodes well for banks with weaker liability franchise and wholesale funded NBFCs," it noted, stressing, "We expect LDR to rise by 0.2- 1.6ppt and NIM to contract 3-15bps, it should drive PAT accretion of 1-9 per cent."Published on August 12, 2026