Sebi offers a way over FPI tax rule hurdle
Intense competition for FCNR (B) deposits has left some lenders apprehensive they could lose overseas customers as their offerings may not be as attractive as those of others. With the Reserve Bank of India (RBI) having lifted the cap on these deposits, a clutch of banks has raised their interest rates making their offers more attractive. In fact, a couple of banks, that had announced new interest rates on FCNR (B) deposits, are understood to be reconsidering their products after the removal of the cap.“We were early to announce rates but will revisit them in the light of the new rules,” said a senior banker.
Commercial banks have sought approval from the banking regulator to allow existing non-resident Indian customers to prematurely withdraw and rebook deposits to take advantage of the time-bound FCNR deposit scheme, which in some cases offers almost double the returns of regular term deposits. Some large depositors are instructing their banks to prematurely close term deposits and redeploying the funds in other banks, bankers said. Banks are offering between 6% and 7.1% for three- to five-year deposits under the special scheme, compared with 3.35% to 4% previously.
The Reserve Bank has cancelled the licence of Karnataka-based Shree Mahalaxmi Urban Co-operative Credit Bank due to its worsening financial position. The Registrar of Co-operative Societies, Karnataka has also been requested to issue an order for winding up the bank and appoint a liquidator, the Reserve Bank of India (RBI) said in a statement on Thursday. On liquidation, about 97.9 per cent of depositors would receive full amount of their deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC). Giving reasons for cancellation of the licence, the RBI said the lender does not have adequate capital and earning prospects and does not comply with certain provisions of the Banking Regulation Act, 1949.
The Reserve Bank of India (RBI) on Wednesday temporarily removed interest-rate caps on select non-resident external (NRE) and foreign currency non-resident (bank) [FCNR(B)] deposits, giving banks greater flexibility to attract overseas funds at a time when policymakers are seeking to strengthen foreign currency inflows and support external-sector stability. Under the revised framework, banks will be free to offer higher interest rates on fresh NRE deposits with maturities of three years and above. The RBI has also withdrawn the ceiling on interest rates for fresh FCNR(B) deposits with maturities of three to five years. The relaxation will remain in force until September 30 and will apply both to fresh deposits mobilised during the period and to eligible renewals upon maturity.
The Reserve Bank of India’s (RBI) incentives to attract Foreign Currency Non-Resident (Bank) (FCNR(B) deposits have prompted leading private-sector banks to approach overseas lenders with proposals aimed at financing their non-resident Indian (NRI) clients and encouraging them to place funds through this route. “Foreign banks will gain access to a large NRI customer base and tap secured lending opportunities with limited credit risk. We, in turn, can multiply FCNR deposits beyond our existing dollar liquidity, while NRIs benefit from interest-rate arbitrage,” said a senior banker at a private-sector lender. According to sources, HDFC Bank, Axis Bank and IndusInd Bank have lined up proposals for offshore lenders as they compete for a share of the estimated $50 billion expected to flow through the FCNR(B) route.
The US-Iran peace deal and the planned reopening of the Strait of Hormuz may have calmed oil markets, but marine cargo and war-risk insurance premiums are unlikely to fall anytime soon, according to industry executives. “For the marine community, crucially absent from the agreement are the practical details surrounding the reopening of the Strait of Hormuz reopening, particularly Iran’s guarantee to respect freedom of movement within the Strait and the region as a whole,” said Marcus Baker, Global Head of Marine, Cargo & Logistics, Marsh. Baker added that while some marine insurers recognise that conditions in the Persian/Arabian Gulf region have improved over the weekend, the overall market response in the short term will largely depend on further de-escalation of hostilities or perceived breaches of the agreement.
The earnings season got over last month. Before we analyse the quarterly performance of listed Indian banks, let's take a look at how they performed in FY26. The combined net profit of listed private and public sector banks is ₹3.94 trillion, the highest ever, 7.47 per cent higher than in FY25. The private banks' collective net profit is up 4.02 per cent to ₹1.96 trillion and that of public sector banks by 11.13 per cent to ₹1.98 trillion. All figures are rounded off. All PSBs have recorded a rise in net profit for the year -- the quantum of rise varies between 1.65 per cent (Punjab National Bank) and 56.18 per cent (Indian Overseas Bank). In contrast, four private banks have reported a drop in net profit. They are IndusInd Bank Ltd (64.69 per cent), Bandhan Bank Ltd (55.43 per cent), Kotak Mahindra Bank Ltd (14.85 per cent) and Axis Bank Ltd (7.27 per cent).
The rising healthcare costs are seen as the key factor behind the health claim burden and rising renewal premiums. When you say healthcare is expensive, what goes unsaid is that people are using more healthcare because they are getting treated more proactively. So, the healthcare utilisation rate rises not by 5-10%, but exponentially. People today are seeking more healthcare to live longer, and be more active and productive in advanced age. This is the trend; you cannot argue against it. So the product, health insurance, is essentially paying for the increased healthcare use across society.
The RBI's recent measures to incentivise overseas borrowings could lower funding costs for banks by 2-2.50 per cent through the external commercial borrowing (ECB) route, helping lenders raise resources at cheaper rates while improving liquidity conditions, according to a report. It also said that the RBI's concessional USD/INR swap facility for ECBs and overseas foreign currency borrowings (OFCBs) will significantly reduce hedging costs for banks, allowing them to mobilise overseas funds while keeping funding costs under control. "The borrowing cost for banks via the ECB route is expected to fall by 2-2.50 per cent, which will enable the system to raise resources while keeping funding costs under control," said brokerage firm Motilal Oswal Financial Services in its report.
Indian lenders have sought clarity from the Reserve Bank of India (RBI) on whether domestic banks can leverage the foreign currency non-resident bank [FCNR(B)] deposit scheme by extending loans to depositors through their overseas branches, bankers said. This follows the RBI’s decision to allow depositors to borrow from foreign banks for placing FCNR(B) deposits with Indian banks, while permitting Indian banks to issue letters of credit (LoCs) to support such borrowings. “It remains unclear whether the guidelines permit overseas branches of Indian banks to provide leverage to their own customers. The current rules do not explicitly address that scenario, and further clarification is needed,” said a senior executive at a large private-sector bank.
India's bank credit growth accelerated to its fastest pace in nearly two years, driven in part by rising borrowing from oil marketing companies hit by lower realisations following the recent surge in crude prices, according to a report by Times of India. Credit expanded 17.7% year-on-year in the fortnight ended May 31, 2026 — the strongest growth recorded so far in FY27 and the highest since June 2024. Outstanding bank credit rose by Rs 1.5 lakh crore between March 31 and May 31, 2026, marking a 0.7% increase in the first two months of the financial year, the report said. Total outstanding credit reached Rs 215.2 lakh crore by the end of May.
A day after the Reserve Bank of India (RBI) released the final contours of its foreign currency non-resident bank [FCNR(B)] deposit scheme, banks have started offering rates ranging from 5% to over 7%. The higher returns reflect the central bank’s decision to exempt incremental FCNR(B) deposits from cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements, experts said. State Bank of India has launched a special deposit scheme, SBI Advantage FCNR(B), with a one-year lock-in period, offering interest rates of 5.25-6% in the three- to five-year maturity bucket. HDFC Bank and Central Bank of India are offering up to 6% on longer-tenor FCNR(B) deposits, while YES Bank and AU Small Finance Bank are offering as much as 7.1% on five-year deposits. CSB Bank is offering 7.05% on FCNR(B) deposits. The revised rates came into effect on June 10.
The asset quality of Indian banks is expected to further improve over the next year, providing cushion against pressure on margins, liquidity and credit growth arising from geopolitical tensions and broader macroeconomic uncertainties. According to consensus estimates compiled by S&P Global Market Intelligence, the gross non-performing asset (NPA) ratio of State Bank of India is seen declining to 0.92% by March 2027 from 0.96% at the end of FY26. HDFC Bank‘s bad loan ratio is projected to improve to 0.76% from 0.78%. The report attributed the betterment to moderating stress in unsecured retail segments such as personal loans, credit cards and microfinance.
The banking sector expects to attract around $40–50 billion through Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits after the Reserve Bank of India’s measures announced last week to boost foreign currency inflows. According to an SBI Research Ecowrap report, fresh FCNR(B) inflows could reach $40–45 billion under the scheme. “In 2013, when the RBI introduced the FCNR(B) facility, fresh inflows of $24.5 billion were mobilised within three months. This time, the facility window is open for four months, and we believe fresh FCNR(B) deposits could amount to $40–45 billion,” the report said. Outstanding FCNR(B) deposits stood at $33.8 billion at the end of March 2026, compared with $32.8 billion a year earlier. “Banks with a larger overseas presence, such as Bank of Baroda, SBI and HDFC Bank, are naturally better positioned to benefit as they have stronger access to the NRI customer base,” a senior public sector bank official said.
Life insurers reported 5% year-on-year growth in new business premium (NBP) in May, the slowest monthly expansion in more than eight months, as the impact of the GST rate reduction on premium collections faded after supporting double-digit growth in the preceding months. The industry’s total new business premium stood at ₹32,030.84 crore in May, compared with ₹30,463.21 crore in the same month last year, according to data released by the Life Insurance Council. The slowdown comes a month after life insurers reported their highest monthly growth in NBP in more than two years. In April, the industry’s NBP had risen 39% year-on-year to ₹30,550 crore. According to the May data, state-owned Life Insurance Corporation of India (LIC) reported a 3% growth in NBP to ₹19,042 crore, while the 26-member private life insurance industry posted an 8% increase to ₹12,989 crore. Both LIC and private life insurers had reported strong double-digit growth in recent months after the government exempted individual life insurance products, including term life policies, from GST in September 2025.
IT service firm, Dynacons Systems and Solutions has secured an order of over Rs 125 crore from the Central Bank of India for a project aimed at the expansion of private cloud. The order will also focus on building advanced AI infrastructure. Dynacons Systems and Solutions: Order key details The project which is domestic in nature aims at building larger and more advanced cloud and AI. It also includes the establishment of a containerization platform and servers based on the NVIDIA H200 Blackwells GPU. The total order value exclusive of GST stands at Rs 125.88 crore, and will be executed within a period of five years. The company in its exchange filing clarified that there are no related-party transactions involved in the project.
Reserve Bank of India (RBI) Deputy Governor Swaminathan J urged that banking-sector resilience should be deliberately built rather than left to chance, laying out five pillars of ‘resilience by design.’ Drawing on India’s post-2015 banking reforms, he argued that transparent stress recognition, stronger balance sheets, sharper supervision, adaptive regulation, and resilient internal bank practices have made the system sturdier- and that work must continue as new risks emerge. Transparent recognition of stress The first pillar, Swaminathan J said, is the transparent recognition of stress. He cited the post-2015 Asset Quality Review as a turning point, “Recognition required banks to provision, owners to recapitalise, borrowers to negotiate, supervisors to intervene, and markets to reassess risk. Transparency changes incentives.”
The resilience of banks will shift from fixing known balance-sheet stress to managing complexity and uncertainty, Reserve Bank of India Deputy Governor Swaminathan J said while speaking at Columbia University on Monday. The speech was uploaded on the regulator’s website on Wednesday. “Recent years have shown that shocks can arise from very different sources: pandemics, geopolitical tensions, supply chain disruptions, commodity price volatility, cyber incidents or sudden shifts in market sentiment. The task, therefore, is not only to prepare banks for known risks, but also to make them adaptable to risks whose timing, form and transmission may be difficult to predict,” said Swaminathan. He said growth in retail, digital and microfinance lending has widened access and thus requires stricter underwriting, fair recovery practices and close monitoring of borrower leverage.
India’s money-market turnover jumped to a record as state-owned lenders stepped up borrowing to fund booming credit demand. The value of trades in the so-called tri-party repurchase segment, which accounts for about 70% of the nation’s money markets, rose to an all-time high of 5.5 trillion rupees ($57.8 billion) on May 13 and has stayed elevated since, according to Bloomberg-compiled data. India’s economic growth has held up well despite the energy crisis caused by the US-Iran war, preserving credit demand. State Bank of India is seeing strong loan uptake from sectors including power, renewables and data centers, Chairman CS Setty said Wednesday.
The government is set to soon constitute the proposed High-Level Committee on Banking for Viksit Bharat, with the aim of receiving its report within three to four months and initiating a new phase of comprehensive banking sector reforms. Sources said the terms of reference for the committee are almost ready and the panel will be constituted once the members are finalised. The committee is expected to undertake a fundamental review of the banking sector architecture and recommend measures to strengthen the system in line with India’s long-term growth ambitions. Among the key issues likely to be examined are the creation of larger Indian banks through consolidation, enhancement of foreign direct investment (FDI) limits in public sector banks (PSBs), rationalisation of voting rights for investors, and a review of regulatory requirements such as the Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR) and banking licence norms.
Banks have sanctioned Rs 35,000 crore loans under the Emergency Credit Line Guarantee Scheme (ECLGS) to MSMEs and industries impacted by the West Asia conflict. The scheme, approved by the Union Cabinet on May 5, aimed at providing additional credit flow of Rs 2.55 lakh crore, including Rs 5,000 crore for airlines hit by the ongoing geopolitical crisis. Lenders have cleared about 80,000 applications with loans amounting to Rs 35,194 crore, and guarantees worth Rs 15,720 crore have been issued as of May 29, Department of Financial Services Joint Secretary Manoj Muttathil Ayyappan told reporters here.
Bank credit stood at Rs 211.87 lakh crore as on May 15, largely flat compared with the previous fortnight, registering a marginal decline of 0.1%, according to data released by the Reserve Bank of India on Friday. On a year-on-year basis, advances grew 16.2%, translating into an absolute increase of Rs 29.59 lakh crore. Deposits came in at Rs 256.89 lakh crore, down 0.7% over the previous fortnight, with an absolute decline of Rs 1.8 lakh crore. Despite the sequential moderation, deposits recorded a healthy 12.2% rise year-on-year, reflecting an increase of Rs 28.01 lakh crore. Investments rose 0.55% on a fortnightly basis to Rs 69.65 lakh crore, while the year-on-year growth stood at 4.2%, with an absolute increase of Rs 2.8 lakh crore.
India’s banking sector reported a 46% year-on-year jump in frauds to ₹48,021 crore in FY26, the highest in three years, even as the number of fraud cases more than halved to 10,114 from 23,722 in FY25, according to the Reserve Bank of India’s Annual Report. The fraud amount in FY26 was more than four times the ₹11,013 crore reported in FY24. Public sector banks accounted for 74% of the total fraud amount in FY26, reporting frauds worth ₹35,709 crore across 5,418 cases. Private sector banks reported ₹11,399 crore involving 3,956 cases. The RBI said data for FY26 included fraud classification in 314 cases amounting to ₹30,199 crore pertaining to previous financial years, which were reported afresh after re-examination in compliance with the Supreme Court’s March 27, 2023 judgement. “An assessment of bank group-wise fraud cases over the last three years indicates that although the number of frauds for public and private sector banks have reduced, the amount involved has increased over the years,” the RBI said.
The Indian banking industry's return on assets (RoA) is expected to slip 10-15 basis points to 1.1-1.2% this fiscal from around 1.3% last fiscal, Crisil Ratings said in a report, citing reduced treasury income and pre-emptive provisioning ahead of the expected credit loss (ECL) framework. Despite the moderation, RoA will remain well above the 20-year average of 0.8% and 10-year average of 0.6%, the ratings agency noted. "The banking sector's net interest margin (NIM) is expected to hold steady at 2.9% this fiscal, after declining 20 basis points (bps) last fiscal," said Subha Sri Narayanan, Director, Crisil Ratings. "Outstanding deposit rates fell ~50 bps against a decrease of ~80 bps in lending rates last fiscal, following a cumulative repo rate cut of 125 bps. However, the cost of liabilities has likely bottomed out. As credit growth continues to outpace deposit growth, competition for deposits remains intense. This, coupled with increasing reliance on pricier funding sources such as bulk deposits, would likely push deposit costs up," she added. Crisil Ratings expects NIM on a full-year basis to remain stable, though higher deposit costs may lead to a correction from last fiscal's exit NIM of above 3% in the fourth quarter. The agency's base-case assumes a stable policy rate this fiscal. Apart from NIM, fee and other income will also impact earnings. Total other income is likely to soften by 5-10 bps to 1.2% last year, primarily due to normalization in treasury income after sharp bond yield gains in H1 last year. Fee and commission income should grow steadily, underpinned by healthy bank credit growth of around 13% this fiscal.
