Contrary to Axis Bank head Amitabh Chaudhry’s view that a surge in FCNR(B) deposits could lead to ‘abnormal lending’, State Bank of India Chairman CS Setty said a day later that the excess liquidity would get absorbed and the inflows deployed over the next three to four months.

“I think everybody will be more responsible for deploying the funds,” Setty told reporters on Thursday at the sidelines of Global Fintech Fest 2026, replying to a question on whether the inflows will lead to abnormal lending.

Chaudhry had said at the same event on Wednesday that foreign currency non-resident (Bank), or FCNR(B), deposits could lead to some abnormal lending as banks needed to deploy the funds. He cautioned that the 18-19% credit growth in the fiscal first-quarter was due to a favourable base effect and could moderate to 15-16% for the full financial year. 

Banks mopped up a record $127.22 billion through FCNR(B) deposits under the RBI’s special foreign-exchange swap window between 8 June and 31 August. This has generated excess liquidity in the banking system, which stood at nearly Rs 10.5 lakh crore on 9 September. 

Setty said he does not expect the RBI's six-member monetary policy committee (MPC) to go for a rate hike in the next policy review in October.

Speaking at the event earlier, Setty said in the age of agentic AI "we may need to devise a 'know your agent' (KYA) on the lines of know your customer (KYC) guidelines which the banks have adopted”. It will be necessary to devise such guidelines, especially in a world where customers' AI agents become commonplace.

The initial costs of deployment will be high on agentic AI but incrementally it will come down as it is used widely, Setty said. 

SBI is now moving towards agentic AI, which goes beyond assisting employees with carrying out individual tasks to systems that can act on behalf of customers and respond to changing circumstances. Setty said AI agents could be deployed across the financial lifecycle, including fraud and new-account detection, know-your-customer (KYC) and anti-money laundering processes to loan appraisal, underwriting and reconciliation.

Agentic AI, which is currently available largely to affluent customers through wealth management and premier banking, can be extended to hundreds of millions of customers.

With financial activities getting increasingly automated, banking sector employees will have to concentrate on value-added relationships, problem-solving and deeper customer engagement, Setty said.