FCNR flows could lead to abnormal lending, bankers need to be careful, says Axis Bank MD

Private sector lender Axis Bank’s managing director and chief executive Amitabh Chaudhry on Wednesday said the over USD 127 billion of FCNR(B) deposits could lead to some “abnormal lending”.

Speaking at the annual Global Fintech Fest 2026 here, the head of the third-largest private sector lender cautioned fellow bankers to be “careful” about the way they deploy the huge sums raised from the diaspora under the concessional swap deal announced by the RBI.

“FCNR could lead to some abnormal lending, because we will have to deploy this,” Chaudhry said, adding that he “hopes” that bankers do not do that.

It can be noted that banks have collected over USD 127 billion in FCNR(B) deposits under the limited period scheme announced by the Reserve Bank in June, which was closed by the apex bank nearly a month ahead of schedule.

Chaudhry said the credit growth for the banking system for FY27 will come at about 15-16 per cent, adding that the current growth of up to 19 per cent is courtesy a lower base of last fiscal.

The Axis Bank CEO also said that he expects the RBI to deliver a rate hike as soon as October’s policy review, adding that the rate differential between Indian and American yields is a “problem”.

“We are staring at some rate hike in the near future; what time I don’t know. Economists are saying it will be in October and December. The gap between India and the US has not been seen for decades; that is a problem,” he said.

Over the next few years, there will be more consolidation in the banking sector, Chaudhry said, adding that Axis Bank will continue to scout for opportunities.

Consolidation in the industry will be driven by the need to have large-sized banks, he said, stressing that size is very essential for banks and all of them will continue realising the same as we go forward.

Size is also a big defence which will work to the benefit of the lenders in the future, he added.

Banks will continue facing challenges from the fintechs going forward, but the same will not be existential, Chaudhry said, making it clear that the same is not an existential one as feared earlier.

Axis Bank looks at the fintech sector both as competition and also a source of partnerships, he said.