In an attempt to handle a weak Indian rupee against the greenback, the government, along with the Reserve Bank of India (RBI), announced a special capital-inflow package to shore up foreign exchange reserves.
It opened a special concessional swap window on June 5, 2026, allowing commercial banks to offer special Foreign Currency Non-Resident Bank Deposits or FCNR(B) Deposits.
To boost inflows from Non-Resident Indians (NRIs) and incentivise them, the RBI introduced three major structural adjustments to fresh deposits with a tenor of 3 to 5 years.
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First, the RBI announced that it would bear the full hedging costs on such medium-to-long-term deposits, enabling banks to raise around $40-50 billion, according to industry estimates.
Second, it also exempted fresh FCNR(B) deposits mobilised by banks RBI exempts fresh FCNR(B) deposits from CRR, SLR norms till Sept. 30 to boost foreign currency inflows. This measure eased pressure on banks’ net interest margins, allowing them to raise rates for NRIs and overseas Indian citizen depositors despite the reduced interest rate differential between India and overseas markets.
Third, the RBI consequently (on June 17) withdrew the interest rate ceiling on fresh 3-year and 5-year FCNR(B) deposits until Sept. 30.
As a result, commercial banks have now raised FCNR(b) deposit interest rates to around 7% p.a. in the case of small finance banks and around 6% p.a. in the case of larger banks, up from 3-4% earlier.
| FCNR(B) Deposit Interest p.a. | ||
|---|---|---|
| 3-Year | 5-Year | |
| State Bank of India | 5.25% | 5.75% |
| HDFC Bank | 6.00% | 6.00% |
| ICICI Bank | 6.00% | 6.00% |
The interest rate offered on FCNR(B) deposits is currently 2.61% higher than the US 10-Year bond yield (as of 23 June 2026). This is expected to nudge NRIs to consider India as a place to park their hard-earned savings.
What are FCNR(B) Deposits?
These are fixed deposits that NRIs can open in a foreign currency. The commonly accepted ones are the US dollar (USD), British pound (GBP), Euro (EUR), Singapore Dollar (SGD), Canadian Dollar (CAD), Australian Dollar (AUD), Hong Kong Dollar (HKD), and Japanese Yen (JPY).
These deposits are offered with a minimum tenure of 1 year and a maximum of 5 years.
The money is kept in the original currency of investment throughout the deposit term (which is unlike the NRE Deposit). There is no Indian rupee exposure.
Most banks compound interest on FCNR deposits semi-annually (every six months), in line with RBI guidelines.
Depending on your liquidity needs, you could choose a half-yearly interest payout mode or the cumulative option.
In the case of the half-yearly payout, the interest is not reinvested – instead, it is redistributed as regular income in foreign currency.
In the cumulative option, interest is reinvested, and you receive the principal and the interest in the same currency at maturity.
Is the deposit and the interest repatriable?
Yes, both the deposit and the interest are fully repatriable, i.e., without any limits or requiring any permission from the RBI.
In other words, you can freely transfer the proceeds back to the country of residence.
And because these deposits are in foreign currency and you remit back the same currency, there is no currency conversion loss or rupee depreciation loss.
That said, keep in mind that the 3-year and 5-year FCNR(B) deposits booked between June 10 and Sept. 30 have a 1-year lock-in period. During this period, you cannot execute a premature withdrawal or repatriate the funds.
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What about the tax implications?
As per the current tax rules, there is no income tax or wealth tax on the interest earned in an FCNR(B) account in India. Thus, banks do not deduct the tax source on these deposits.
However, the tax treatment in the NRI’s country of residence depends entirely on that country’s tax laws.
For example, in the US and the UK, FCNR(B) interest is treated as ordinary taxable interest income.
Whereas in the Gulf region, most countries do not levy personal income tax, making the FCNR(B) favourable for NRIs living there.
Similarly, in Singapore, there is no income tax on income from debt investments.
Should You Invest in FCNR(B) Deposits?
At the current interest rate and given the yield differential, FCNR(B) deposits seem like a worthwhile avenue for NRIs, seafarers, persons of Indian origin (PIOs), and overseas citizens of India (OCIs) to diversify. The deposits may potentially help hedge dollar holdings.
But keep in mind, the Sept. 30 deadline is real if you want to enjoy the current high interest rate. Don’t miss it. After this date, most banks would reduce interest rates on FCNR(B) Deposits.
When approaching the 3-year and 5-year tenures, make sure to account for your liquidity needs, given the 1-year lock-in.
On an individual basis, you also need to weigh in on the tax treatment in the country of residence, the currency requirement, and the long-term financial goals you are planning for.
Invest sensibly. Be a thoughtful investor.
Happy investing!
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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