# ICICI Bank Anticipates Q3 Margin Pressure From FCNR-B Deposit Costs Full impact of foreign currency deposits expected to weigh on margins before recovery begins. - **Source:** [mint - companies](https://www.livemint.com/rss/companies) - **Published:** 2026-10-17 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/0a71534a-ad27-44e9-89ba-93cad8a5157c ## Margin Squeeze Forecast ICICI Bank expects its net interest margin to dip marginally in the December quarter. Executive director Sandeep Batra stated that the full cost impact of FCNR-B deposits raised in the September quarter will materialize now. Following this period, the bank anticipates that margins will begin to recover despite current policy rate levels. ## Performance Metrics Overview The bank reported a 17.7% year-on-year growth in net interest income, reaching ₹25,339 crore. Profit before tax rose by 20.4% to ₹19,724 crore. Excluding treasury losses of ₹230 crore caused by rising government bond yields, the profit before tax growth was even stronger at 23.4%, totaling ₹19,954 crore for the period. ## Impact of Deposit Mix The net interest margin fell to 4.18% in the September quarter from 4.36% in June. Batra attributed 9-10 basis points of this decline to a shift in the deposit mix. The bank mobilized $18 billion in FCNR-B deposits, which significantly lifted total deposits by 27.1% on-year while lowering the CASA ratio to 35.8%. ## FCNR-B Funding Dynamics The landed cost of these foreign currency deposits reached approximately 6.5%, slightly exceeding the initial estimate of 6.30-6.40%. These deposits, which run for three to five years, are exempt from reserve and priority-sector lending requirements. This exemption allows the bank to deploy the full amount into loan books and bulk deposit repayments. ## Loan Growth Drivers Total loans grew 30% on-year, with domestic corporate loans rising 30.6% due to capital expenditure and longer working capital cycles. Conversely, the credit card book shrank 9.7% as the bank exited unprofitable segments. Management clarified that this contraction is not a credit quality issue but rather a result of a high base. ## Interest Rate Outlook Management anticipates the RBI may raise the repo rate twice more by 25 basis points each, reaching 6%. Since a large portion of the bank’s loan portfolio is linked to the repo rate, loan yields adjust faster than deposit costs during hiking cycles, a pattern the bank expects to repeat in coming quarters. ## Insurance Regulation Analysis The bank assessed the impact of an Irdai consultation paper proposing to cap commissions on single-premium life cover at 2%. Batra noted that bancassurance fees represent less than 1% of total income and 5% of fee income. Consequently, the bank expects the potential regulatory change to have an absolutely minimal effect on earnings. ## Strategic Financial Outlook ICICI Bank is navigating a complex environment characterized by high deposit costs and shifting liquidity conditions. By leveraging FCNR-B inflows to fund corporate growth, the bank is positioning itself for a margin recovery after the third quarter. The focus remains on balancing liquidity buffers with efficient capital deployment across its diverse lending segments. ## Sources covering this story - https://www.livemint.com/companies/company-results/icici-bank-sees-another-margin-squeeze-in-q3-as-fcnr-b-costs-kick-in-11792238457204.html — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._