Foreign investments into India’s banking and non-banking financial sector have surged to nearly $15 billion in recent deals, signaling strong confidence in the country’s long-term financial opportunity. But according to Amitabh Chaudhry, MD & CEO of Axis Bank, capital alone will not solve the underlying funding challenge, with deposit mobilisation continuing to remain the sector’s most pressing concern.
Speaking to CNBC-TV18 on the sidelines of the World Economic Forum 2026 in Davos, Chaudhry said that while inflows from global investors—both strategic and financial—bring much-needed firepower and staying power, real balance sheet expansion ultimately depends on deposits, not just foreign capital.
“Almost $15 billion has come in across quite a few deals,” Chaudhry said. “You’ve seen investments in mid-tier banks, large NBFCs, and others. It’s great that these investors see India as a long-term opportunity. But financial institutions are among the most leveraged in the world. Capital is important, but real balance sheet growth comes only when you get deposits in.”
Foreign players bring brand but not guaranteed growth
While global investors often bring brand recognition and market expertise, Chaudhry cautioned that these advantages do not automatically translate into deposit growth in India.
“Some of these foreign brands may be well-known outside India, but they are not necessarily recognised domestically,” he said. “Yes, you have more firepower now, but ultimately getting deposits is a hard grind that requires time and local understanding.”
He also flagged that increased foreign participation will raise competitive intensity in the Indian banking sector, but does not necessarily pose an immediate threat to domestic banks.
“We have to watch them closely, and a few institutions may succeed in creating large banks, but it is not going to be easy,” he added.
Deposit mobilisation remains a systemic challenge
Despite strong credit demand, India’s deposit growth remains in the 10–12% range, while credit growth expectations are closer to 15–17% for the next fiscal year. Chaudhry said this divergence cannot persist indefinitely and will require a combination of market forces and RBI support to resolve.
“Overall deposit growth is still a bit of a worry,” he said. “The nature of deposits is changing as more retail investors put money into equities. Banks are seeing more wholesale deposits coming in, and they come at a cost. Just hiking retail deposit rates will not be sufficient to mobilise enough funds.”
FDI inflows reflect long-term confidence
Chaudhry said the latest wave of foreign investments reflects growing global confidence in India’s financial services sector amid steady GDP growth and reforms to ease regulatory and fiscal constraints.
“The fact that these players see India as an opportunity is a tick in the box for the sector,” he said. “But we must not lose sight of the core challenge: sustainable deposit growth remains critical for the banking system to fund India’s ambitions.”
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Below is the excerpt of the interview.
Q: Let me start by talking to you about both global growth as well as the growth of the Indian economy. In fact, the IMF has just put out its report. They’ve hiked the outlook for 2026 to 3.3%. It’s up by about 20 basis points. For 2027, global growth at 3.2%, which is steady. And for India, again, there is an upgrade of 70 basis points to 7.3% for FY26, and then 6.4% for FY27 and FY28. What do you make of where global growth is, as well as the Indian economy?
Chaudhry: Well, in spite of what is going on geopolitically, I think you have seen that a couple of large countries around the world have started demonstrating growth. The US has produced better numbers than what people thought when the whole tariff war started. As far as India is concerned, I think this forecast is catching up with what local economists have been saying for quite some time—that India should be able to do 7–8%. I’m sure this 6.4% should also get upgraded over a period of time if we keep performing well. India has done a lot of work on easing some of the fiscal, monetary, and regulatory constraints. They realise, with the net FDI situation where it is, that something has to be done, and done urgently. So they have been taking pretty radical steps over the last six to nine months. But I do believe more needs to be done if you have to upgrade this forecast of 6.4% to something higher.
Q: I’ll come to the measures the government can or should undertake to try and draw in more foreign direct investment. But let’s talk specifically about the banking sector. It’s been the clear outperformer from a market standpoint. It’s also been the big sector where FDI has actually come in. We’ve seen both financial as well as strategic deals in the banking sector. What do you make of that?
Chaudhry: Almost $15 billion has come in across quite a few deals. You’ve seen investment in both NBFCs and banks—mid-tier banks and, obviously, large-sized NBFCs—which is great for the sector. The fact that they’re seeing the Indian financial services market as a place to invest in is a tick in the box for the opportunity it presents. A lot of these players may be seeing lesser growth in some of the markets they operate in, and they see India as a long-term opportunity. It’s great that they’ve got this capital and these big brands behind them, so they don’t have to worry about capital going forward. But financial institutions are the most leveraged institutions in the world. You get the capital in, but real balance sheet growth comes only when you get deposits in. Given the size of some of these institutions, getting deposits will remain the tough part they need to execute on. And while a lot of these brands might be well known outside India, they’re not necessarily that well known in India. So that brand, per se, is not going to help you. Yes, you have more firepower now, and more staying power, but ultimately, getting deposits in India is going to be a hard grind all the way.
Q: If I were to read between the lines of what you’re saying, you’re not really worried about competitive intensity increasing on account of these banks being able to bring in the kind of cash that they have.
Chaudhry: We do have to worry about competitive intensity in India, and this will add to it. Are we extremely worried? Well, we have had cases where some foreign players have come in and invested in India in the past, and it’s evident what they’ve been able to do. That does not mean that’s exactly what will happen in the future. We have to watch them closely. I’m sure one or two institutions might be able to get over the hump and really create a large global bank or a large Indian bank. I do believe the Indian economy, to grow to its ambitions, needs not five or six, but at least 10 very large banks. So I hope some of them do upgrade themselves. But it is not going to be easy.
Q: Let’s talk about the hard grind for deposits. How much has changed on that front? The last time we spoke here in Davos, this was the big theme—that it was getting harder and harder to mobilise deposits. It’s showing up in the numbers. How much of a hard grind is it likely to be going forward?
Chaudhry: Since the last time we talked, RBI has openly stated that it will provide durable liquidity in the system. But I think they do need to do a little bit more. We have had cases where liquidity has almost gone away because RBI has intervened in the markets. Durable liquidity means constant, continuous liquidity in the market so that people can plan and act accordingly. Secondly, credit growth has picked up, but government balances with RBI remain extremely high—some of the highest we’ve seen in the recent past. So deposit growth is still taking more time to come through. If you look at the numbers that have been published, deposit growth remains in the 10–12% range. People have started talking about credit growth of 15–17% for next year. As I’ve said in the past, if credit growth is 15–17%, deposits need to get there at some point. Both cannot diverge indefinitely.
Q: Do you expect this divergence to widen?
Chaudhry: I don’t think so. If RBI wants the economy to grow, and if measures are being taken to ensure that 7.4% growth is a given and that similar numbers are delivered next year, then the economy has to be funded. That means credit growth has to come back, which means deposits have to catch up at some stage. That obviously requires RBI to do more than what it is doing today.
Q: Forget what RBI has to do. What about banks?
Chaudhry: When deposits come into the system, banks will get their fair share. The problem is not that deposits are lying somewhere and we are unable to capture them. The problem is twofold. One, deposit growth is where it is. Second, the nature of deposits is changing. As Indian retail investors invest more in the stock market, more of the deposits coming back into the banking system are wholesale rather than retail, and they come at a price.
Q: Even if you were to hike deposit rates, it wouldn’t really make a big difference to deposit mobilisation?
Chaudhry: Yes, just hiking retail deposit rates does not necessarily make much of a difference because wholesale deposits are market-priced. Large depositors bid it out, and the market pays what it is willing to pay at that point. Some banks will always be desperate and may pay more than the market. That is pretty much a given. Overall deposit growth is still a bit of a worry, and we do need to get it up. RBI is aware of what needs to be done.
Watch accompanying video for entire conversation.
