FCNR Deposits Surge: Why Rupee Stability Matters Despite Limited Currency Gains?

FCNR deposits have emerged as a major source of foreign currency inflows, with collections crossing the $60 billion mark. Jitendra Sriram, Senior Fund Manager, Baroda MF, says the scheme has been successful in attracting substantial funds, although its impact on banks’ credit-deposit ratios may be limited. FCNR deposits can provide low-cost funding benefits because they do not carry the same reserve requirements as domestic deposits. The inflows have also helped strengthen India’s foreign exchange position. Despite expectations of stronger rupee appreciation, the currency has remained relatively stable amid global geopolitical and market pressures. Lower FX vulnerability could provide greater confidence in the rupee.