File pic: State Bank of India Chairperson Challa Sreenivasulu Setty
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SHASHANK PARADE bl-online Administrator
Banks are unlikely to immediately deploy the liquidity generated through FCNR(B) deposits, with the process expected to take another three to four months, according to Challa Sreenivasulu Setty, Chairman of State Bank of India (SBI).“I think everybody will be more responsible. It will take about three to four months for the liquidity to be deployed. I don’t think it will happen in the next month,” said Setty on the sidelines of the Global Fintech Festival 2026.surplus liquidityThe comments come at a time when the banking system is flush with liquidity. RBI data showed surplus liquidity in the system stood at about ₹10.50 lakh crore as on September 9. The surplus has largely been driven by banks mobilising $127.23 billion under the RBI’s special FCNR(B) deposit mobilisation window between June 8 and August 31.Echoing the need for caution, Amitabh Chaudhry, MD & CEO of Axis Bank, warned that the large FCNR(B)-linked inflows could encourage aggressive lending as banks look to deploy excess funds. “FCNR could lead to some abnormal lending, because we will have to deploy this. I hope they don’t do that,” he said, urging banks to maintain underwriting discipline.At the same time, the SBI management maintained that credit demand remains robust. Ashwini Kumar Tewari, Managing Director, SBI, had said the bank’s loan pipeline remains strong. “Overall, if you include the undisbursed term loans, unutilised working capital and pipeline, it exceeds ₹9 lakh crore. So, there is a strong pipeline for corporate credit,” he said.Sanjay Agarwal of CareEdge Ratings said corporate credit demand should remain supportive of liquidity absorption. “Corporates are going to banks rather than the markets because market rates are high. That’s one reason why credit growth remains strong and should help in deploying the additional FCNR(B) liquidity,” he said. He described the surge in FCNR(B) inflows as a near-term ‘problem of plenty’ for banks, but said the funds should get deployed by year-end.Meanwhile, credit growth of about 17-18 per cent continues to outpace underlying deposit growth of 10-11 per cent, excluding FCNR(B) inflows, suggesting the surplus liquidity should gradually get absorbed. Gaura Sengupta, Chief Economist at IDFC FIRST Bank, said FCNR(B) deposits provide banks with cheaper, longer-tenor funding. While lenders face a temporary negative carry, they are likely to replace costlier bulk deposits and certificates of deposit with FCNR(B) funds. She expects the overhang to persist until November-December.Madan Sabnavis, Chief Economist, Bank of Baroda, said banks that raised FCNR(B) deposits at 6-6.5 per cent would seek higher-yield deployment opportunities. He added that the RBI could wait until after GST and advance-tax outflows before taking durable liquidity absorption measuresPublished on September 10, 2026
