Axis Bank says FCNR flows present large opportunity, share in foreign deposit flows to be higher than its organic market

Axis Bank Sees FCNR Flows as Growth Opportunity, Targets Higher Market Share

Axis Bank says FCNR flows present – Axis Bank has highlighted the transformative potential of FCNR flows, emphasizing that foreign currency deposits under the Reserve Bank of India-backed FCNR-B scheme could significantly boost its market share. In a recent earnings call, CFO Puneet Sharma underscored the opportunity, stating, “We are confident that FCNR flows will surpass our domestic market share in the coming quarters.” This strategic focus aligns with the bank’s broader vision to capitalize on the growing demand for foreign currency investments among non-resident Indians (NRIs) and international clients.

FCNR-B Scheme and Market Potential

As of June 30, Axis Bank’s deposit market share stood at 5.1%, with its share of total sector advances at 5.7%. However, the CFO’s remarks suggest that the bank is optimistic about expanding its presence in the FCNR space, which has been gaining traction due to favorable regulatory policies and increased investor interest. Sharma noted that the FCNR-B scheme allows NRIs to park funds in Indian rupees, offering a secure and liquid investment option that could drive substantial inflows. “FCNR flows present a meaningful opportunity to strengthen our deposit base,” he added, highlighting the scheme’s role in diversifying revenue streams and improving banking margins.

“The potential for FCNR flows is immense, particularly as global investors seek stable returns in emerging markets,” Sharma remarked. “We are well-positioned to leverage this trend and secure a larger portion of the foreign deposit pie.”

Strategic Initiatives to Enhance FCNR Adoption

Axis Bank’s leadership has outlined a multi-pronged strategy to maximize the benefits of FCNR flows. In addition to expanding its NRI network, the bank is collaborating with international banks to streamline cross-border transactions and attract foreign investors. These efforts are expected to complement its existing deposit franchise, which has shown resilience despite macroeconomic headwinds. “We aim to enhance our share in foreign currency deposits by creating a more robust ecosystem for NRIs and overseas clients,” said Amitabh Chaudhry, the bank’s managing director and CEO. This includes digital platforms tailored for foreign investors, as well as localized financial products that align with their needs.

“FCNR flows are not just a revenue driver but also a way to diversify our funding sources and reduce dependency on domestic markets,” Chaudhry explained. “This aligns with our long-term goal of strengthening our international footprint.”

Loan Growth and FCNR Synergy

While the bank has seen a surge in total deposits, rising 18% year-on-year to ₹13.7 trillion, its loan growth remains a key focus. Advances grew by 19% in the reporting quarter, driven by a 38% increase in wholesale loans and a 25% rise in SME financing. The management attributed this growth to sectors like energy, commercial real estate, infrastructure, and metals, which are benefiting from economic tailwinds. “FCNR flows can further support this momentum by providing low-cost funding for credit expansion,” said executive director Munish Sharda, adding that the bank is pushing for balanced growth across all asset classes.

“Our loan portfolio is increasingly reliant on foreign currency deposits, which offer competitive rates and stability,” Sharda stated. “This synergy between FCNR flows and credit growth is critical for sustained profitability.”

Cost Efficiency and Future Outlook

Axis Bank has also made strides in cost optimization, reporting a 35 basis point decline in its cost of funds year-on-year to 5.04%. This reduction, combined with the anticipated growth from FCNR flows, positions the bank to improve its net interest margins (NIMs). Sharma noted that NIMs have reached a low point, currently at 3.46%, but expressed confidence in a recovery. “FCNR flows are expected to play a pivotal role in reversing this trend,” he said, highlighting how foreign deposits can stabilize margins and reduce reliance on domestic funding.

“With FCNR flows contributing to a more diverse funding mix, we are hopeful about a gradual rebound in NIMs,” Sharma added. “This will be a key factor in achieving our targets for FY27.”

Expansion and Competitive Edge

As Axis Bank prepares for a leadership transition, the bank is doubling down on its FCNR strategy to ensure continuity in growth. CFO Puneet Sharma’s tenure ends on September 1, with Rajeev Mantri set to take over on September 28, 2026. The incoming leadership is expected to build on Sharma’s vision, further integrating FCNR flows into the bank’s operations. “The FCNR opportunity is vast, and we are committed to capturing it,” Mantri stated during a pre-appointment briefing, reinforcing the bank’s focus on international markets.

With the global economy showing signs of recovery and NRIs increasingly allocating funds to India, Axis Bank’s FCNR strategy is poised to yield significant returns. The bank’s ability to balance domestic and international deposits, while maintaining a competitive edge in loan growth and cost management, positions it well to achieve its market share goals. As Sharma emphasized, “FCNR flows are not just a short-term gain—they are a long-term opportunity for sustainable growth.”