Several Indian banks, including HDFC Bank, Yes Bank, and AU Small Finance Bank, have increased interest rates on foreign currency deposits for Non-Resident Indians (NRIs) following the Reserve Bank of India’s recent relaxation of FCNR(B) deposit regulations. The move is aimed at attracting greater foreign currency inflows amid ongoing pressure on the rupee and foreign exchange reserves.
The RBI recently announced a temporary exemption for fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements. The relaxation applies to fresh deposits with maturities ranging from three to five years mobilised until September 30, 2026.
Following the RBI’s decision, banks have responded by offering significantly higher returns to NRI depositors.
Revised FCNR Deposit Rates
HDFC Bank
- Increased FCNR deposit rates by approximately 235 to 265 basis points.
- Now offers up to 6% interest on eligible foreign currency deposits.
AU Small Finance Bank
- Offering 7.1% interest on three-year FCNR deposits.
- Providing 7% interest on five-year FCNR deposits.
Yes Bank
- 7% interest on three-year deposits.
- 7.05% interest on four-year deposits.
- 7.10% interest on five-year deposits.
Why RBI Relaxed The Rules
The RBI’s decision is part of a broader strategy to strengthen foreign currency inflows into India. By exempting fresh FCNR(B) deposits from CRR and SLR requirements, banks can deploy a larger share of deposited funds instead of keeping a portion reserved with the central bank.
This increased flexibility allows banks to offer more attractive interest rates to NRI customers while helping India attract additional foreign currency deposits.
The relaxation is also linked to the RBI’s recently announced Dollar-Rupee swap facility, which aims to improve foreign exchange liquidity and support overall financial stability.
What This Means For NRIs
The higher FCNR deposit rates present an attractive opportunity for NRIs looking to earn returns on foreign currency savings while avoiding exchange rate risks associated with converting funds into rupees. Since FCNR deposits are maintained in designated foreign currencies, investors can benefit from competitive interest rates without exposure to currency fluctuations.
Financial experts believe the latest rate hikes could lead to increased participation from NRIs, particularly those seeking secure, fixed-income investment options backed by Indian banks.
With rates touching 7.1% at some lenders, FCNR deposits have become significantly more appealing compared to many global fixed-income alternatives currently available to overseas Indians.