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ICICI Bank beats profit estimates as FCNR(B) deposit inflows squeeze margins

ICICI Bank beats profit estimates as FCNR(B) deposit inflows squeeze margins

Money Moves

Q2 net profit rises 20.1% to ₹14,843 crore, but net interest margin slips to 4.18% from 4.36%

Today: ICICI Bank reports September-quarter net profit of ₹14,843 crore

Overview

Updated 2 hours ago

India's second-largest private lender beat profit estimates on Saturday, but the growth masked a squeeze on its core earnings engine. Standalone net profit rose 20.1% year on year to ₹14,843 crore for the September quarter, ahead of the ₹14,366 crore analysts expected. Net interest margin—what the bank earns on each rupee lent minus what it pays on deposits—fell to 4.18%, down from 4.36% in the June quarter.

The pressure comes from foreign-currency deposits. FCNR(B) deposits, held by non-residents in foreign currency and converted into rupees for lending, inflated reported deposit growth to 27.1% and loan growth to 30%. Strip those out and growth falls to 17% and 24.1%. The bank expects margins to dip again next quarter before recovering as it deploys the funds.

Why it matters

ICICI's margin squeeze signals Indian banks earn less per rupee lent as high-cost foreign deposits reshape the sector.

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Key Indicators

₹14,843 crore (standalone)
September-quarter net profit
Up 20.1% year on year, beating the ₹14,366 crore analyst estimate. Consolidated profit was ₹16,333 crore.
4.18%
Net interest margin
Fell from 4.36% in the June quarter and 4.30% a year earlier, squeezed by high-cost FCNR(B) deposits.
1.20%
Gross non-performing asset ratio
Improved from 1.38% in June and 1.58% a year ago; net NPA ratio eased to 0.30%.
27.1% reported / 17.0% ex-FCNR(B)
Year-on-year deposit growth
Foreign-currency FCNR(B) inflows added roughly 10 percentage points to reported deposit growth.
30.0% reported / 24.1% ex-FCNR(B)
Year-on-year loan growth
Loans provided against FCNR(B) deposits account for the gap between reported and underlying growth.

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Timeline

December 2025 October 2026

3 events Latest: Today
  1. ICICI Bank reports September-quarter net profit of ₹14,843 crore

    Today Earnings

    Standalone net profit rose 20.1% year on year, beating estimates, but net interest margin fell to 4.18% on FCNR(B) deposit inflows.

  2. June-quarter net interest margin at 4.36%

    Earnings

    ICICI's prior-quarter results set the baseline for the current squeeze, with net interest margin at 4.36%.

  3. RBI directs agricultural standard asset provision

    Regulatory directive

    At RBI's direction, ICICI sets aside ₹1,283 crore in standard asset provisions on agricultural priority-sector loans.

Scenarios

1

ICICI Bank margins recover after FCNR(B) deployment

Possible Resolves by Jan 31, 2027

Discussed by: Company management, via NDTV Profit reporting

Management expects net interest margin to slip again in Q3 (December quarter) as it deploys still-uninvested FCNR(B) funds, then recover. The December-quarter report would show whether the trough is contained and the recovery path holds. NDTV Profit previews flagged margin pressure heading into results; the question is whether the dip stays modest.

2

RBI approves ICICI's agricultural provision reversal

Likely Resolves by Apr 30, 2027

Discussed by: Company management, via NDTV Profit reporting

ICICI holds ₹1,283 crore in standard asset provisions on agricultural priority-sector loans, set aside at RBI's direction. Management says its remediation review is complete and expects to reverse the provision over the next two quarters, pending RBI approval. Approval would lift reported profit in the quarters it lands.

3

Margin pressure lingers into fiscal 2028

Possible Resolves by May 31, 2027

Discussed by: CNBC TV18 sector coverage and market analysts

If FCNR(B) deployment stalls or term-deposit competition keeps funding costs elevated, the margin trough stretches past Q3. CNBC TV18 noted the next quarter would show whether FCNR(B) balance-sheet gains translate into sustainable growth without further margin pressure. A weak Q4 would extend the squeeze into the next fiscal year.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

September–November 2013

RBI FCNR(B) swap window (2013)

New RBI Governor Raghuram Rajan opened a window letting banks swap FCNR(B) and NRE foreign deposits into rupees at pre-set rates, aiming to defend a sliding rupee. Banks drew in roughly $26 billion over two months.

Then

The rupee stabilized and foreign reserves rebuilt as dollar inflows returned.

Now

Banks took on costlier foreign-currency liabilities with future repayment obligations, and FCNR(B) became a proven tool for shoring up the currency at balance-sheet cost.

Why this matters now

Today's FCNR(B) inflows again inflate bank balance sheets and squeeze net interest margins, echoing the same trade-off in 2013.

September 2022

RBI relaxes FCNR(B) rules (2022)

To counter rupee weakness against the dollar, RBI removed the swap-cost ceiling on FCNR(B) and NRE deposits, letting banks price them at attractive unhedged rates and pull in foreign currency.

Then

Foreign currency deposit inflows rose as banks competed for the higher-rate funds.

Now

Banks absorbed high-cost liabilities that pressured margins, the same dynamic visible in ICICI's current results.

Why this matters now

The 2022 relaxation showed how quickly FCNR(B) deposits can serve as a currency-defense lever and how their cost lands on banks' income statements.

Sources

(8)