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Saturday, 17 October
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The people’s newsroom

EconomyBanking

Dollar deposits from abroad swell the books of HDFC, ICICI and Axis

HDFC Bank and Axis Bank alone raised more than $22 billion in FCNR-B deposits last quarter. The money lifted loan and deposit growth while margins narrowed.

From the editorial desk · MumbaiPublished
HDFC Bank and Axis Bank head offices in Mumbai (file photo)
HDFC Bank and Axis Bank head offices in Mumbai (file photo)Photos: 2300032369 G Priya Varshitha / Wikimedia Commons; Manukrishnan80 / Wikimedia Commons, CC0, CC BY-SA 4.0

Key points

  1. HDFC Bank raised $11.5 billion in FCNR-B deposits through the RBI's swap window.
  2. Axis Bank had mobilised $10.62 billion by 30 September.
  3. Without FCNR-B money, ICICI Bank's deposit growth falls from 27.1% to 17%.

Foreign currency deposits from non-resident Indians poured into the country’s biggest private banks in the July-September quarter, and Saturday’s results showed how much they changed the shape of their balance sheets.

HDFC Bank raised $11.5 billion in foreign currency non-resident (FCNR-B) deposits through the Reserve Bank’s swap window, and its overseas branches lent $5.7 billion against them. Axis Bank had mobilised $10.62 billion by 30 September and issued $4.69 billion of standby letters of credit to other lenders on loans backed by the deposits. Between those two banks alone, that is more than $22 billion.

Growth, with an asterisk

ICICI Bank did not give a dollar figure in its headline numbers, but the effect showed. Its deposits rose 27.1% from a year earlier; take out FCNR-B money and growth was 17%. Its loans rose 30%, or 24.1% without lending by its international branches against those deposits.

At HDFC Bank, term deposits grew 22.8% while current and savings balances rose 10.8%. Axis used part of its haul to run down bulk deposits from companies and institutions, which fell 8.6% from June.

Smaller lenders rode the same wave. Federal Bank, which reported on Friday, posted a 45% jump in profit on the back of FCNR deposits.

Margins narrow

Margins moved the other way. HDFC Bank’s net interest margin slipped to 3.16% from 3.26% in the June quarter, and ICICI Bank’s to 4.18% from 4.36%. Before Axis reported, analysts had expected its margin to fall by 7-12 basis points on the FCNR-B inflows; it came in at 3.36%.

Investors will get their first chance to price all of this in when markets reopen on Monday.