Banks across India are seeing a steady rise in overseas deposits after the Reserve Bank of India (RBI) revised its Foreign Currency Non-Resident Bank (FCNR-B) deposit scheme.
The new rules have made the scheme more attractive for Non-Resident Indians (NRIs), especially those living in Gulf countries.
According to reports, banks have already raised around $3–4 billion through FCNR-B deposits and expect this number to grow significantly in the coming months.
Strong Response from NRIs, Especially in Gulf Countries
Bankers say interest in FCNR-B deposits is increasing as more NRIs become aware of the revised scheme.
The highest participation is expected from Indians working in the Gulf region, which has a large expatriate population.
Industry estimates suggest that total inflows could reach $40–50 billion over time, driven by better interest rates and relaxed RBI guidelines.
To attract more deposits, banks are actively reaching out to NRI customers across major international markets.
Higher Interest Rates and Easier Rules Boost Demand
One of the key reasons for rising interest is the higher interest rates offered by banks:
Small finance banks are offering up to 7.5% interest
Large banks are offering around 6.5% interest
Banks are also benefiting from RBI’s decision to cover hedging costs for FCNR-B deposits with maturities of 3 to 5 years.
This makes it easier for banks to offer better returns to depositors.
RBI’s Relaxed Rules Encourage More Foreign Inflows
The RBI recently eased several restrictions to encourage more overseas deposits and strengthen India’s foreign exchange reserves.
Key changes include:
Removal of interest rate caps on fresh FCNR(B) deposits (3–5 years)
Relaxation of rules for NRE deposits of 3 years and above
Temporary validity of these relaxations until September 30, 2026
Earlier, banks had strict limits on how much interest they could offer.
Now, they have more flexibility to provide higher returns to NRIs.
What Changed Compared to Earlier Rules?
Before the revision, banks had to follow strict interest rate limits:
NRE deposits could not exceed domestic term deposit rates
FCNR(B) deposits had a capped return linked to benchmark rates plus 350 basis points
With the new framework, these limits have been eased, allowing banks to compete more aggressively for overseas funds.
Why the RBI Made This Move
The RBI’s main goal is to attract stable foreign currency inflows and support the Indian rupee.
By allowing higher interest rates and covering hedging costs, the central bank hopes to:
Boost foreign exchange reserves
Attract long-term deposits from NRIs
Strengthen rupee stability
Improve overall banking liquidity
Outlook: More Inflows Expected in Coming Months
Bankers believe FCNR-B inflows will increase further as awareness grows and more NRIs take advantage of higher returns.
With stronger outreach efforts and relaxed regulations, the scheme is expected to become one of the key channels for bringing foreign money into India’s banking system.
