The RBI’s decision to withdraw the interest rate ceiling on fresh foreign currency non-resident (FCNR-B) deposits of three-five year tenors till September 30 provides banks greater flexibility to offer competitive rates, thereby supporting foreign currency deposit inflows, Crisil Intelligence said in its report on the Indian banking sector.
The contribution of the rest-of-the-world (ROW) segment, comprising non-resident deposits, to overall bank deposits may witness a modest uptick in fiscal 2027, providing supplementary support to deposit growth, it said.
In FY26, the share of ROW deposits declined to 6.2 per cent from 7.1 per cent recorded in FY19.
“While household deposits remain the primary source of funding, the gradual diversification of the deposit base suggests that other segments may also contribute to deposit growth,” Crisil Intelligence said.
Citing examples of a similar move by RBI in 2013, the report said that such regulatory measures in the past have led to a sharp increase in non-resident deposit inflows, supporting foreign currency liabilities and system liquidity.
Meanwhile, the report said that the broader banking system continues to face the challenge of strengthening liability franchises, with credit growth outpacing deposit growth.Total deposits in India’s banking sector grew 13.5 per cent year-on-year in FY26 to around Rs 262 trillion, while the system-level credit-deposit ratio remained above 81 per cent.
Crisil Intelligence further said that the deposit balance remains concentrated, with the top 10 states accounting for around 76 per cent of system deposits as of March 2026, broadly unchanged from March 2019. Maharashtra leads with a 23 per cent share, followed by Delhi, Karnataka, Uttar Pradesh and Tamil Nadu.