NRIs rushing to lock in 7% dollar returns? Here's how FCNR deposits compare with NRE, NRO FDs
A special RBI window has made FCNR(B) deposits one of the most attractive fixed-income options for NRIs, with some banks offering over 7% returns in US dollar terms. Here's how FCNR deposits compare with NRE and NRO deposits—and which option suits your needs.
- Jul 14, 2026,
- Updated Jul 14, 2026 6:10 PM IST
Interest in Foreign Currency Non-Resident (Bank), or FCNR(B), deposits has surged after banks raised deposit rates under a special Reserve Bank of India (RBI) window that remains open until September 30, 2026. Before investing, however, NRIs should understand how FCNR deposits differ from NRE and NRO fixed deposits and ensure they have the right bank account under FEMA rules.
Why are FCNR(B) deposits attracting NRIs?
Banks have been raising FCNR(B) deposit rates after the RBI eased regulations on fresh FCNR(B) deposits with maturities between three and five years. The move is aimed at attracting foreign currency deposits from Non-Resident Indians (NRIs), strengthening banks' foreign currency resources and supporting the country's external sector.
The higher rates have intensified competition among lenders, particularly small finance banks. Equitas Small Finance Bank currently offers up to 7.52% on select US dollar FCNR(B) deposits, while several other banks are offering returns in the 5-7% range, depending on the currency and tenure.
MUST READ: Why NRIs are rushing to lock in FCNR deposits before RBI's September 30 deadline
Unlike conventional fixed deposits, FCNR(B) deposits allow NRIs to hold savings in foreign currencies such as the US dollar, pound sterling, euro, Japanese yen, Australian dollar and Canadian dollar. Since both the principal and interest remain denominated in the deposit currency, investors are protected from rupee depreciation. For eligible NRIs, the interest earned is also exempt from income tax in India, making FCNR(B) deposits an attractive option for those seeking dollar-denominated returns.
Why NRIs need an NRE or NRO account first
Before opening an FCNR(B) deposit, NRIs must first comply with the Foreign Exchange Management Act (FEMA). According to Zerodha Varsity, once an individual becomes an NRI, they can no longer continue operating a regular resident savings account. Instead, they must switch to either an NRE (Non-Resident External) or an NRO (Non-Resident Ordinary) account.
MUST READ: RBI temporarily lifts interest rate caps on select FCNR(B), NRE deposits till Sept 30
An NRE account is meant for income earned abroad and converted into Indian rupees. The principal and interest are fully repatriable, and the interest earned is tax-free in India.
An NRO account, on the other hand, is designed for income earned within India, such as rent, pension, dividends or other domestic receipts. Interest on NRO deposits is taxable, and repatriation is subject to RBI rules and prescribed limits. Fixed deposits can be opened against both NRE and NRO accounts.
SBI expects $8-9 billion in FCNR inflows
According to SBI's Economic Research Department (ERD), inflows under the RBI's concessional FCNR(B) swap window could reach $8-9 billion across the banking system. The report expects inflows to be front-loaded, unlike the 2013 scheme where a majority of deposits came towards the end of the window.
MUST READ: FCNR(B) vs NRE vs US Fixed Deposits: Which option makes more sense for NRIs?
SBI attributed the expected inflows to four key factors. The RBI is bearing the hedging cost on the principal portion of fresh FCNR(B) deposits, reducing funding costs for banks. The regulator has also provided greater clarity on standby letters of credit (SBLCs) and leverage norms, enabling banks to launch products sooner. In addition, the four-month mobilisation window gives banks and their overseas counterparts more time to structure deposits. The focus on five-year deposits, instead of shorter tenures that dominated the 2013 scheme, is also expected to provide greater stability to foreign capital inflows.
Should NRIs consider FCNR(B) deposits?
For NRIs with idle foreign currency, FCNR(B) deposits currently offer an opportunity to earn attractive dollar-denominated returns without taking currency risk. However, experts recommend comparing interest rates across banks, checking lock-in conditions and understanding tax implications before investing. Choosing the appropriate NRE or NRO account is equally important, as FEMA rules prohibit NRIs from continuing to operate regular resident savings accounts after their residential status changes.
Interest in Foreign Currency Non-Resident (Bank), or FCNR(B), deposits has surged after banks raised deposit rates under a special Reserve Bank of India (RBI) window that remains open until September 30, 2026. Before investing, however, NRIs should understand how FCNR deposits differ from NRE and NRO fixed deposits and ensure they have the right bank account under FEMA rules.
Why are FCNR(B) deposits attracting NRIs?
Banks have been raising FCNR(B) deposit rates after the RBI eased regulations on fresh FCNR(B) deposits with maturities between three and five years. The move is aimed at attracting foreign currency deposits from Non-Resident Indians (NRIs), strengthening banks' foreign currency resources and supporting the country's external sector.
The higher rates have intensified competition among lenders, particularly small finance banks. Equitas Small Finance Bank currently offers up to 7.52% on select US dollar FCNR(B) deposits, while several other banks are offering returns in the 5-7% range, depending on the currency and tenure.
MUST READ: Why NRIs are rushing to lock in FCNR deposits before RBI's September 30 deadline
Unlike conventional fixed deposits, FCNR(B) deposits allow NRIs to hold savings in foreign currencies such as the US dollar, pound sterling, euro, Japanese yen, Australian dollar and Canadian dollar. Since both the principal and interest remain denominated in the deposit currency, investors are protected from rupee depreciation. For eligible NRIs, the interest earned is also exempt from income tax in India, making FCNR(B) deposits an attractive option for those seeking dollar-denominated returns.
Why NRIs need an NRE or NRO account first
Before opening an FCNR(B) deposit, NRIs must first comply with the Foreign Exchange Management Act (FEMA). According to Zerodha Varsity, once an individual becomes an NRI, they can no longer continue operating a regular resident savings account. Instead, they must switch to either an NRE (Non-Resident External) or an NRO (Non-Resident Ordinary) account.
MUST READ: RBI temporarily lifts interest rate caps on select FCNR(B), NRE deposits till Sept 30
An NRE account is meant for income earned abroad and converted into Indian rupees. The principal and interest are fully repatriable, and the interest earned is tax-free in India.
An NRO account, on the other hand, is designed for income earned within India, such as rent, pension, dividends or other domestic receipts. Interest on NRO deposits is taxable, and repatriation is subject to RBI rules and prescribed limits. Fixed deposits can be opened against both NRE and NRO accounts.
SBI expects $8-9 billion in FCNR inflows
According to SBI's Economic Research Department (ERD), inflows under the RBI's concessional FCNR(B) swap window could reach $8-9 billion across the banking system. The report expects inflows to be front-loaded, unlike the 2013 scheme where a majority of deposits came towards the end of the window.
MUST READ: FCNR(B) vs NRE vs US Fixed Deposits: Which option makes more sense for NRIs?
SBI attributed the expected inflows to four key factors. The RBI is bearing the hedging cost on the principal portion of fresh FCNR(B) deposits, reducing funding costs for banks. The regulator has also provided greater clarity on standby letters of credit (SBLCs) and leverage norms, enabling banks to launch products sooner. In addition, the four-month mobilisation window gives banks and their overseas counterparts more time to structure deposits. The focus on five-year deposits, instead of shorter tenures that dominated the 2013 scheme, is also expected to provide greater stability to foreign capital inflows.
Should NRIs consider FCNR(B) deposits?
For NRIs with idle foreign currency, FCNR(B) deposits currently offer an opportunity to earn attractive dollar-denominated returns without taking currency risk. However, experts recommend comparing interest rates across banks, checking lock-in conditions and understanding tax implications before investing. Choosing the appropriate NRE or NRO account is equally important, as FEMA rules prohibit NRIs from continuing to operate regular resident savings accounts after their residential status changes.