How $127 Billion FCNR(B) Inflows Boost Indian Bank Stocks

India's FCNR(B) deposit scheme closed in August with $127.2 billion in inflows, nearly doubling in its final days, boosting foreign exchange reserves and supporting bank loan growth. The RBI now faces the challenge of managing surplus liquidity from these funds. The inflows, which accounted for over 93% of total dollar receipts, brought cumulative special scheme totals to $136.4 billion. Brokerages expect this to improve India's balance of payments surplus and support credit growth, with ICICI Bank mobilizing $17.9 billion and SBI raising $9 billion. Nomura projects a $66 billion balance of payments surplus for FY27 and suggests the RBI may use tools like reverse repo operations to absorb liquidity. ICICI Bank and Kotak Mahindra Bank are preferred picks among large banks, while HDFC Bank was excluded due to succession concerns.