The withdrawal of India’s highest-value currency note will boost Indian banks' lending margins by leading to growth in deposits and lowering the cost of funds, according to a note from Axis Mutual Fund, which also suggests the measure could boost deposits by as much as two trillion rupees through the end-September deadline to exchange the notes. Furthermore, the inflow of notes would lead to an increase in low cost deposits, bringing down the overall cost of funds for banks and improving their margins. However, the gains could be short-lived once people start withdrawing the money.
