Mumbai: The record haul of foreign currency non-resident-bank, or FCNR(B), deposits could temporarily push bank lending above the normal growth trends, Axis Bank chief executive Amitabh Chaudhry said, cautioning that the current 18-19% credit expansion could moderate over the full year as the economy absorbs the surplus liquidity.
"I think I'll rely on my economists. They're saying 15% to 16% for the year. I think this 18-19% also has a base effect coming in, and FCNR(B) inflows could lead to some abnormal lending," Chaudhry said while speaking at the Global Fintech Fest 2026 in Mumbai.
Banks have seen a sharp influx of foreign currency deposits after the central bank's special dollar-rupee swap facility, strengthening their funding position and potentially providing additional liquidity for loan growth.
Chaudhry also flagged the narrowing interest-rate differential between India and the US as a concern and said domestic rates may have to move higher.
"I think we are staring at some rate hike in the near future. What time it will be, I don't know, but if you read what the economists are saying, they're saying likely in October and December," Chaudhry said. "The gap between the US and India has come to a level where it has not been seen for some time. It's a problem."
Separately, Chaudhry backed greater consolidation in Indian banking, arguing that lenders would increasingly need scale to compete.
"Consolidation of the banking industry, I think that should happen... I do believe that India needs bigger banks. And the one way to get there is for some of the banks to come together," he said.
He expects consolidation to gather pace over the next four-five years as differences in scale between lenders widen. Asked whether Axis Bank itself had the appetite to participate in consolidation, Chaudhry said: "We always have the appetite. We believe in that."
Scale, he said, will become even more critical as banks increasingly deploy artificial intelligence and customer data to offer personalised products and services.
"If you don't have the scale, if you don't have the market share in some of these things, you cannot get it. I do believe that larger banks will have a better opportunity." He added that the gap between larger and smaller banks could "only increase, not come down" if smaller lenders are unable to execute.
Axis Bank is already experimenting with AI-led personalisation and expects it to become central to the way it engages with customers.
"In the next four quarters, I think it will become the way we do our business. Four quarters? Max," Chaudhry said, referring to the use of data and AI to tailor products and services at an individual customer level. "Because if we don't do it, someone else will."
