FCNR deposit surge is a liquidity gift with a margin tax. Indian banks have raised dollars faster than they can deploy them, so the surplus sits in lower-yielding assets and squeezes NIMs this quarter

What happened: A surge in foreign-currency deposits has given Indian banks ample liquidity for credit growth, but analysts expect the surplus to squeeze net interest margins this quarter, especially at private lenders. Key numbers: Motilal Oswal expects private-bank NIMs to fall 8-20 basis points in the September quarter. Why it matters: Banks mobilised funds faster than they can deploy into loans, creating negative carry that weighs on margins. PSU banks are seen as more resilient. A likely repo-rate hike should support NIMs.

A surge in foreign-currency deposits has given Indian banks ample liquidity for credit growth, but analysts expect the surplus to squeeze net interest margins this quarter, especially at private lenders.

Banks mobilised funds faster than they can deploy into loans, creating negative carry that weighs on margins. PSU banks are seen as more resilient. A likely repo-rate hike should support NIMs.