HDFC Bank garners nearly $12 billion through FCNR-B deposits under RBI swap window: Report

HDFC Bank has mobilised nearly $12 billion through Foreign Currency Non-Resident (Bank) or FCNR-B deposits under the Reserve Bank of India’s concessional swap facility, according to a CNBC-TV18 report.

The deposits were raised at an interest rate of 6.25%, the report said, adding that the fundraising could provide a significant boost to the private lender’s foreign-currency resources.

“The bank has garnered $11.5 billion to $12 billion from the FCNR-Bs under RBI’s concessional swap facility,” sources told CNBC-TV18.

The RBI introduced the concessional swap window to encourage banks to attract FCNR-B deposits and increase foreign-currency inflows into India. Under the arrangement, banks can mobilise FCNR-B deposits and subsequently swap the foreign currency with the central bank at a concessional rate.

RBI bears concessional swap cost

The swap cost on these deposits is expected to be around 3% per annum and is being borne by the RBI under the special facility.

The RBI initiative is aimed at strengthening foreign-currency liquidity in the domestic banking system while helping support the rupee amid continuing pressures on the external sector.

HDFC Bank’s credit-to-deposit ratio may improve

The sizeable FCNR-B mobilisation is also expected to help HDFC Bank reduce its credit-to-deposit (CD) ratio.

The lender’s CD ratio had increased substantially following its merger with erstwhile parent HDFC Ltd. Since the merger, HDFC Bank has been working to gradually bring the ratio down by strengthening its deposit base.

Banks raise $127 billion under RBI facility

RBI data separately showed that banks collectively mobilised around $127 billion through FCNR-B deposits under the concessional swap window.

The substantial amount raised across the banking sector highlights the strong response from lenders to the central bank’s initiative and indicates significant demand for the special funding facility.

HDFC Bank risks losing Nifty top spot

HDFC Bank is facing the prospect of losing its position as the most influential stock in India’s benchmark equity index as a leadership transition and growing governance concerns intensify pressure on the lender.

The weighting of India’s most valuable bank in the NSE Nifty 50 Index has fallen to 9.81%, putting it only marginally ahead of rival ICICI Bank, whose weighting stands at 9.34%, according to the latest Bloomberg data. At the beginning of the year, HDFC Bank’s lead over ICICI Bank was more than four percentage points.

Reliance Industries is currently the third-largest constituent, with a weighting of slightly more than 8% in the index.

The surprise decision by HDFC Bank CEO Sashidhar Jagdishan to step down when his current term expires next month has added to investor concerns surrounding the lender.

The leadership change comes as the bank faces questions over its business practices and governance, issues that were initially highlighted by its former part-time chairman.

Jagdishan’s departure has increased uncertainty over the bank’s future leadership and added another challenge for a lender already dealing with a sharp decline in investor confidence.