State-owned lenders reported a sharp 161 percent year-on-year jump in foreign exchange earnings in the first quarter of the current financial year, driven by a steep depreciation in the Indian rupee amid global uncertainties.
According to a Moneycontrol analysis of bank presentations, 12 public sector lenders reported a combined forex income of Rs 3,307 crore in the April-June quarter of FY26, as compared to Rs 1,271 crore in the same period last fiscal.
In Q1FY26, the Indian rupee depreciated by 2.03 percent against the US dollar, creating favourable conditions for forex trading gains. Analysts note that heightened volatility, coupled with strong demand for foreign currency transactions, helped bolster earnings for these banks.
The surge in forex income comes against a backdrop of global economic uncertainty, with shifting interest rate expectations in major economies and geopolitical tensions influencing currency markets.
In order to curb the volatility in the currency market, the Reserve Bank of India (RBI) is said to have intervened. According to the RBI's bulletin, the central bank gross sold $19.13 billion in April and May in the spot foreign exchange market.
The forex trade
Usually, while dealing in foreign exchange, banks earn income through the spread between the buying and selling rates of various currencies. In currency trading, there is bid price and ask price for the exchange rate. The bid price is the exchange rate at which the dealer will pay to buy a currency from a seller, and the ask price is the exchange rate at which a bank must pay to buy that same currency from the dealer.
The bid price is higher than the ask price, and the difference between the two allows banks to earn gains from the transactions. A weaker rupee can widen this spread, particularly in periods of high volatility, translating into higher profits per transaction, dealers said.
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