KOLKATA: Banks have been treading with caution regarding foreign currency denominated deposits despite the Reserve Bank of India (RBI) offering more flexibility on overseas liability expansion as a way of boosting capital inflows.This is primarily because of two reasons. First, banks are increasingly sourcing funds from global markets at cheaper rates. Second, demand for foreign currency loans from companies remains static. So, there is not much upward movement in foreign currency non-resident-bank (FCNR-B) deposit rates, although the central bank had raised the deposit rate ceiling at the last monetary policy announcement on December 6 by previous governor Shaktikanta Das."Banks are increasingly sourcing funds from global markets at competitive rates, making FCNR-B deposits less attractive (instrument for them)," Indian Overseas Bank managing director Ajay Kumar Srivastava said. "Softening interest rates in global markets have made it easier for domestic banks to raise US dollar funds by way of syndication loan /borrowing at competitive rates."IOB has kept FCNR-B deposit rates unchanged since October 15 last year."There is not much demand for foreign currency funds. The bank has alternative options to generate cost-effective funds," said Karur Vysya Bank's managing director, B Ramesh Babu.In December, all banks cumulatively saw a mere $58 million in inflows in their FCNR-B deposit accounts. The inflow in December and January was $612 billion as compared with $960 million in the preceding two months, data from the RBI's monthly bulletin showed. Banks had garnered $1876 million as FCNR-B deposits in September alone.Since FCNR-B deposits are maintained in foreign currencies such as dollar, euro, pound and yen, they do not get impacted by exchange rate fluctuations."Our FCNR rate was competitive at the time of the changes brought in by the RBI. As our foreign currency loan requirements were being met by the fresh inflows of the FCNR deposit, we did not have a need to increase the rate to attract more deposits," CSB Bank managing director Pralay Mondal said.The RBI in December raised the interest rate ceiling on FCNR-B deposits by 150 basis points "in order to attract more capital inflows". This relaxation will be available till March 31, 2025. "We have seen steady growth in our FCNR portfolio from our existing customers, who are keen to protect their foreign currency risk," Federal Bank's executive director Shalini Warrior said.