Axis Bank says FCNR flows present a big opportunity, share of foreign deposit flows to be higher than its organic market

Mumbai: Axis Bank expects its share of foreign exchange flows through the Reserve Bank of India-backed scheme to be higher than its overall business share. “As a franchise, we are happy to say that our market share will be higher than organic market share,” Chief Financial Officer Puneet Sharma said in the bank’s June quarter earnings report.

As of June 30, the bank’s share of the deposit market was 5.1%, while its share of total sector advances was 5.7%, according to the investor presentation.

Axis Bank Managing Director and CEO Amitabh Chaudhry said the FCNR-B deposit scheme is attracting a lot of interest from non-resident Indians (NRIs) and the bank sees a “meaningful opportunity” to grow its deposit base through the NRI franchise and through tie-ups with overseas banks.

Quick answers to key questions

•5 QUESTIONS

The FCNR-B deposit scheme allows Non-Resident Indians (NRIs) to deposit foreign currency in Indian banks. It is significant for Axis Bank as it represents a significant opportunity to grow its deposit base and improve its liquidity, given the strong interest from NRIs.

Axis Bank plans to increase its share of the foreign currency deposit market through strategic tie-ups with overseas banks and leveraging its existing NRI franchise, expecting its FCNR deposit share to exceed its organic market share.

Non-resident Indians are showing great interest in FCNR deposits due to the favorable terms offered under the Reserve Bank of India-backed scheme, which provides them with attractive opportunities to earn interest in foreign currency.

FCNR deposits are expected to improve Axis Bank’s net interest margin (NIM) by increasing overall liquidity and enable the bank to strategically leverage this additional liquidity for growth initiatives.

Yes, NRIs should consider depositing funds with Axis Bank under the FCNR scheme before the September 30 deadline as it offers a promising opportunity to earn favorable returns in a stable currency environment.

However, the bank did not comment on the deposit flows collected so far, saying it expects to have a clearer picture by next quarter. The FCNR-B window is open until September 30.

Sharma said FCNR(B)’s deposits represent an opportunity to focus on growth and use this additional liquidity for that growth. This liquidity and growth could subsequently provide the bank with an opportunity to “pay off some liabilities”.

Realized margins are falling

“We’ll see how it plays out,” he said, adding that it should help banks’ margins improve in the future. The private lender’s net interest margin (NIM) for the quarter was 3.46%, down from 3.62% in the previous quarter and 3.80% a year ago.

“As far as NIM is concerned, it is the bottom of the cycle. We hope you will see the journey of NIM moving in the right direction from now on,” Sharma added.

This was Sharma’s last hire at the bank as he is set to join HDFC Bank as CFO-Designate from September 1 and eventually take over as CFO from December 2026. Axis Bank’s board on Saturday approved the appointment of former Bandhan Bank CFO Rajeev Mantri as Sharma’s replacement from September 28, 2026.

Axis Bank’s cost of funds fell 35 bps yoy and 2 bps qoq to 5.04% in the reported quarter, with the bank saying it is working to strengthen its depository franchise through greater generalization and a more stable liquidity mix.

Total deposits grew by 18% year-on-year and by 3% quarter-on-quarter. ₹13.7 trillion at the end of June. Deposits on current accounts grew by 6% year-on-year and deposits on savings accounts by 14%, which together make up 38% of total deposits. Time deposits grew by 23% during this period.

The bank said it continues to gain market share in both advances and deposits. Total advances increased year-on-year by 19% and by 2%. ₹12.6 trillion, driven by a 38% increase in wholesale loans, 25% in loans to small and medium enterprises (SMEs), and 8% in retail loans.

Strong growth in wholesale lending was driven by sectors experiencing “underlying economic challenges and strong transaction flows”, such as energy, commercial real estate, infrastructure, metals and industrials, the bank’s management said. Demand from mid-sized businesses is strong and the bank is also seeing growth from conglomerates and non-bank lenders, particularly for priority sector loans.

Sharma said the bank will continue to grow loans at 300 bps above the industry level, which is expected to be around 12% for FY27.

While retail loan growth has been slower, disbursements have started to improve and the bank expects growth to pick up in the coming quarter, chief executive Munish Sharda said. “We are looking to grow retail assets across all our lines and we are now seeing healthy growth,” he said.