There is good news for Non-Resident Indians (NRIs) looking to invest their overseas earnings in India.
Several banks have increased interest rates on FCNR(B) deposits after the Reserve Bank of India (RBI) announced measures to encourage foreign currency inflows.
As a result, some banks are now offering interest rates of up to 7.1% on US dollar deposits, making FCNR accounts more attractive than before.
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What Is an FCNR(B) Deposit?
An FCNR(B) deposit is a fixed deposit account designed specifically for NRIs.
It allows them to keep their overseas earnings in foreign currencies such as US dollars, pounds, euros, Australian dollars and Canadian dollars while earning interest in India.
One of the biggest advantages of these deposits is that investors are protected from fluctuations in the Indian rupee, as both the deposit and maturity amount remain in foreign currency.
Bandhan Bank Offers Up to 7.1% Interest
Among major banks, Bandhan Bank is currently offering one of the highest interest rates on FCNR(B) deposits.
The bank is offering 7.1% interest on US dollar deposits of $1 million or more for tenures between three and five years. For deposits below $1 million, the interest rate is 7%.
According to the bank, these rates allow NRIs to secure attractive returns for a longer period while reducing concerns related to currency depreciation.
PNB and South Indian Bank Also Increase Rates
Punjab National Bank (PNB) has also revised its FCNR(B) deposit rates across various currencies.
For deposits below $1 million, PNB is offering up to:
6.5% on US dollar deposits
6.5% on pound sterling deposits
4.95% on euro deposits
4.9% on Canadian dollar deposits
5.5% on Australian dollar deposits
For deposits above $1 million, the rates increase slightly, with US dollar and pound sterling deposits earning up to 6.6%.
South Indian Bank has also increased its rate to 6.5% on US dollar FCNR(B) deposits with maturities ranging from three to five years.
Smaller Banks Are Offering Higher Returns
Several private and small finance banks are offering even better returns than some large lenders.
AU Small Finance Bank is offering up to 7.1% interest on five-year FCNR(B) deposits, matching Bandhan Bank’s highest rate.
CSB Bank has increased its rates to 6.95% for deposits with tenures between three and four years.
Yes Bank is offering up to 6.6%, while Equitas Small Finance Bank has also revised its FCNR(B) deposit rates after the RBI’s latest announcement.
How Do Large Banks Compare?
India’s biggest banks are currently offering comparatively lower returns.
State Bank of India, HDFC Bank, ICICI Bank and Axis Bank are offering interest rates of around 6% on FCNR(B) deposits with maturities between three and five years.
Bank of Baroda recently increased its rates and now offers up to 6.25% on five-year FCNR(B) deposits.
Why Are Banks Increasing FCNR Deposit Rates?
The recent increase in rates comes after the RBI introduced a special USD-Rupee forex swap facility for banks.
Under this arrangement, banks can accept fresh FCNR(B) deposits and swap eligible US dollar deposits with the RBI.
This helps banks manage currency risks more effectively while attracting stable foreign currency funds.
The RBI has also temporarily removed the interest rate ceiling on fresh FCNR(B) deposits with maturities between three and five years until September 30, 2026.
Similar relaxation has been provided for certain NRE deposits as well.
What Does This Mean for NRIs?
The latest rate hike has created a good opportunity for NRIs looking for stable returns on their foreign currency savings.
With some banks now offering more than 7% interest on US dollar deposits, NRIs can lock in higher returns for three to five years without worrying about fluctuations in the value of the Indian rupee.
Those planning to invest may find this a suitable time to compare FCNR(B) deposit rates across banks and choose an option that matches their financial goals.