India’s banking sector is witnessing a significant rise in deposit inflows, with NRI (Non-Resident Indian) deposits reaching an 11-year high. According to recent data, these deposits have climbed from $14.7 billion to nearly $16 billion in FY25, registering an impressive year-on-year growth of 11%. This marks a clear trend of increasing confidence and interest among NRIs in parking their funds in Indian banks.
A key reason for this surge is the relative attractiveness of Indian interest rates. While the Indian rupee has shown some recent weakness, the beginning of a rate cut cycle has also influenced this upward trend. Typically, when a rate cut cycle begins, deposit inflows increase as investors rush to lock in higher interest rates before they decline. NRIs are acting on this same logic, seizing the opportunity to earn better returns in India than in their home countries, where deposit rates may be 0.5% to 0.6% lower.
Another factor is the strategic shift by Indian banks. Over the past year, many banks have faced challenges in raising domestic deposits. As a result, they have turned their focus towards attracting NRI deposits, which are not only higher in ticket size but also more consistent in inflow. This makes them a reliable source of long-term funding.
The interest from NRIs is also driven by India's relatively stable financial ecosystem and competitive interest rates. Banks are leveraging this opportunity by expanding their presence in regions with significant NRI populations, such as Gulf countries and Kerala, which are traditional hubs for remittances and NRI banking activity.
So, which banks stand to gain the most?
1. Federal Bank – Perhaps the biggest beneficiary, with around 51% of its total deposit base coming from NRI deposits. Its long-standing presence in NRI-heavy regions gives it a unique edge.
2. State Bank of India (SBI) – India’s largest bank also has a sizable exposure to 32% NRI deposits, benefiting from its extensive network and brand trust.
3. Canara Bank – This public sector bank continues to grow its NRI deposit base and is expected to leverage the ongoing trend for long-term gains.NRI Exposure is Around 30%
4. Mid-cap banks – Several mid-sized banks are also well-positioned to benefit:
- South Indian Bank
- CSB Bank
- ESAF Small Finance Bank
These banks are actively expanding their operations in high-NRI-concentration areas and enhancing their service offerings to attract more overseas customers.
In summary, as NRI deposits climb to a decade-plus high, banks with significant exposure to this segment are poised for strong gains. With the interest rate environment expected to soften in the coming months, this momentum may continue, providing a vital boost to bank balance sheets and the broader Indian financial ecosystem.
Disclaimer:
The information provided in this article is for educational and informational purposes only. It does not constitute financial advice or recommendations. Readers are advised to consult with a qualified financial advisor before making any investment or banking decisions.
