Non-Resident Indians (NRIs) looking to earn better returns on their foreign currency deposits now have a reason to smile.
Several Indian banks, including HDFC Bank, Yes Bank, and AU Small Finance Bank, have significantly increased interest rates on foreign currency deposits.
The move comes shortly after the Reserve Bank of India (RBI) announced special measures to attract more foreign currency into the country.
The rate hike is expected to encourage NRIs to park more of their savings in Indian banks while also helping India strengthen its foreign exchange reserves.
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Which Banks Have Increased Interest Rates?
Following the RBI’s announcement, major banks quickly revised their deposit rates.
HDFC Bank has increased interest rates by 235 to 265 basis points, taking rates up to 6 percent on eligible deposits.
AU Small Finance Bank is now offering up to 7.1 percent interest on three-year deposits and 7 percent on five-year deposits.
Meanwhile, Yes Bank has also introduced attractive rates for NRI customers.
The bank is offering 7 percent on three-year deposits, 7.05 percent on four-year deposits, and 7.10 percent on five-year deposits.
These higher rates make foreign currency deposits more appealing for NRIs looking for better returns.
Why Did Banks Increase NRI Deposit Rates?
The increase comes after the RBI relaxed certain regulations related to Foreign Currency Non-Resident Bank [FCNR(B)] deposits.
The central bank is trying to attract more dollar inflows as the Indian rupee faces pressure and foreign exchange reserves remain under watch.
To support this goal, the RBI has given banks more flexibility in managing fresh FCNR(B) deposits, allowing them to offer higher interest rates to depositors.
RBI’s New Relaxation Explained
On June 8, the RBI announced that fresh FCNR(B) deposits with maturities of three to five years will be exempt from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements.
This benefit will be available for deposits mobilized until September 30, 2026.
Normally, banks are required to keep a portion of deposits aside to meet CRR and SLR rules.
With this exemption, banks can use a larger share of the funds they receive, improving profitability and enabling them to offer better returns to customers.
How Does This Help India?
The RBI’s move is linked to its newly introduced US Dollar-Rupee swap facility, which aims to bring more foreign currency into the banking system.
Higher deposit rates can encourage NRIs to invest more money in Indian banks, increasing the flow of dollars into the country.
This can help strengthen India’s foreign exchange reserves and provide support to the rupee during periods of global uncertainty.
Part of a Bigger RBI Strategy
The latest relaxation is part of a broader set of measures announced by RBI Governor Sanjay Malhotra on June 5.
The overall objective is to boost foreign currency inflows, improve liquidity in the financial system, and reduce pressure on the country’s external finances.
For NRIs, the policy change has created an opportunity to earn significantly higher returns on foreign currency deposits while contributing to India’s financial stability.