FCNR(B) windfall lifts NBFCs, small private banks: Why these stocks may be the bigger winners
The $136.4 billion FCNR(B) inflow has strengthened system liquidity, with NBFCs and small private banks emerging as potential bigger beneficiaries. Jefferies says the liquidity boost could help keep rates lower, while MOSL sees systemic credit growth rising to 14.3% in FY27, with upside to 15.5–16%.
- Sep 6, 2026,
- Updated Sep 6, 2026 8:35 AM IST
The massive mobilisation of Foreign Currency Non-Resident (Bank), or FCNR(B), deposits could create a bigger opportunity for NBFCs and smaller private banks than for the lenders that directly attracted the funds. Jefferies expects the improved system liquidity from the $136.4 billion FCNR(B) inflow to disproportionately benefit these segments by helping keep funding conditions favourable.
NBFCs, small private banks outperform
The stock market has already begun reflecting this expectation. According to Jefferies data, NBFC stocks have gained 15% over the past three months, while small private banks have risen 11%. By comparison, large private bank stocks gained 5% and the Nifty 50 advanced just 2% over the same period.
The relative outperformance comes as banks completed a major mobilisation exercise ahead of the FCNR(B) window's August 31 closure. Jefferies said mobilisation “shot up in last week of the FCNR(B) window”, with more than $60 billion coming into the banking system in the final 10 days.
The inflows have increased liquidity across the system, potentially improving the funding environment for lenders and financial companies. Jefferies analysts Prakhar Sharma and Vinayak Agarwal said the flows “enhance liquidity ahead of festive season & may help keep rates lower.”
Why smaller lenders could benefit
The key attraction for NBFCs and smaller private banks is the potential impact of easier liquidity conditions. While FCNR(B) deposits themselves carry lower margins than typical deposits, the broader system-level liquidity improvement can help support credit availability and funding conditions.
This distinction is important. The biggest FCNR(B) mobilisers were large banks, including ICICI Bank, HDFC Bank and State Bank of India. ICICI Bank mobilised $17.88 billion, while HDFC Bank's mobilisation was estimated at around $11.5-12 billion and SBI collected close to $9 billion.
Yet the liquidity created by this mobilisation is not confined to the banks that attracted the deposits. Jefferies' view is that NBFCs and smaller private banks could see a disproportionate benefit as liquidity improves and rates remain under pressure.
ALSO READ: FCNR deposit bonanza: Economists explain why deft liquidity management will be key
Credit growth outlook gets a boost
Motilal Oswal has also raised its estimate for systemic credit growth to 14.3% in FY27, while flagging an upside possibility of 15.5-16%. The stronger credit-growth outlook provides another potential tailwind for lenders and financial companies if improved liquidity translates into stronger loan demand and funding conditions.
MOSL has identified ICICI Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank as its top picks linked to the trend. Jefferies, meanwhile, rates ICICI Bank, HDFC Bank, SBI, Kotak Mahindra Bank and AU Small Finance Bank as Buy, with estimated 12-month upside ranging from 11% to 34%.
The FCNR(B) inflow, therefore, is not simply a deposit story. The report suggests its more significant market impact could come through the liquidity and credit cycle, with NBFCs and smaller private banks potentially emerging as some of the biggest beneficiaries.
DO READ: Major banks slash FCNR deposit rates from September 1: HDFC Bank, SBI, PNB, Axis Bank rates compared
The massive mobilisation of Foreign Currency Non-Resident (Bank), or FCNR(B), deposits could create a bigger opportunity for NBFCs and smaller private banks than for the lenders that directly attracted the funds. Jefferies expects the improved system liquidity from the $136.4 billion FCNR(B) inflow to disproportionately benefit these segments by helping keep funding conditions favourable.
NBFCs, small private banks outperform
The stock market has already begun reflecting this expectation. According to Jefferies data, NBFC stocks have gained 15% over the past three months, while small private banks have risen 11%. By comparison, large private bank stocks gained 5% and the Nifty 50 advanced just 2% over the same period.
The relative outperformance comes as banks completed a major mobilisation exercise ahead of the FCNR(B) window's August 31 closure. Jefferies said mobilisation “shot up in last week of the FCNR(B) window”, with more than $60 billion coming into the banking system in the final 10 days.
The inflows have increased liquidity across the system, potentially improving the funding environment for lenders and financial companies. Jefferies analysts Prakhar Sharma and Vinayak Agarwal said the flows “enhance liquidity ahead of festive season & may help keep rates lower.”
Why smaller lenders could benefit
The key attraction for NBFCs and smaller private banks is the potential impact of easier liquidity conditions. While FCNR(B) deposits themselves carry lower margins than typical deposits, the broader system-level liquidity improvement can help support credit availability and funding conditions.
This distinction is important. The biggest FCNR(B) mobilisers were large banks, including ICICI Bank, HDFC Bank and State Bank of India. ICICI Bank mobilised $17.88 billion, while HDFC Bank's mobilisation was estimated at around $11.5-12 billion and SBI collected close to $9 billion.
Yet the liquidity created by this mobilisation is not confined to the banks that attracted the deposits. Jefferies' view is that NBFCs and smaller private banks could see a disproportionate benefit as liquidity improves and rates remain under pressure.
ALSO READ: FCNR deposit bonanza: Economists explain why deft liquidity management will be key
Credit growth outlook gets a boost
Motilal Oswal has also raised its estimate for systemic credit growth to 14.3% in FY27, while flagging an upside possibility of 15.5-16%. The stronger credit-growth outlook provides another potential tailwind for lenders and financial companies if improved liquidity translates into stronger loan demand and funding conditions.
MOSL has identified ICICI Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank as its top picks linked to the trend. Jefferies, meanwhile, rates ICICI Bank, HDFC Bank, SBI, Kotak Mahindra Bank and AU Small Finance Bank as Buy, with estimated 12-month upside ranging from 11% to 34%.
The FCNR(B) inflow, therefore, is not simply a deposit story. The report suggests its more significant market impact could come through the liquidity and credit cycle, with NBFCs and smaller private banks potentially emerging as some of the biggest beneficiaries.
DO READ: Major banks slash FCNR deposit rates from September 1: HDFC Bank, SBI, PNB, Axis Bank rates compared