HDFC Bank, ICICI Bank raise FCNR(B) deposit rates to 6.25%: What it means for NRI investors

India's two largest private sector lenders, HDFC Bank and ICICI Bank, have raised interest rates on select Foreign Currency Non-Resident (Bank), or FCNR(B), fixed deposits to 6.25%, offering a higher return to Non-Resident Indians (NRIs) looking to park foreign earnings in India.

The increase follows a government-backed measure to reduce hedging costs for banks, enabling lenders to offer better returns on certain FCNR(B) deposits while encouraging foreign currency inflows.

The Reserve Bank of India (RBI) had announced in June that the government would bear the hedging cost on FCNR(B) deposits with maturities between three and five years until September 30, 2026. The move effectively lowered banks' funding costs, allowing them to increase interest rates by 25 basis points on eligible deposits.

HDFC Bank offers 6.25% for 3-5 year deposits

HDFC Bank is now offering 6.25% interest on FCNR(B) deposits for tenures ranging from three years to less than four years, four years to less than five years, and five years.

The bank has also specified that FCNR(B) deposits booked between June 10 and September 30, 2026, for tenures of three to five years will carry a one-year lock-in period.

Customers opening deposits through net banking should note that requests are processed within two working days, excluding weekends and public holidays. The applicable interest and foreign exchange rates will be those prevailing on the date the deposit is processed rather than the date the request is submitted.

ICICI Bank matches the revised rates

ICICI Bank has also raised the interest rate to 6.25% on FCNR(B) deposits of ₹4 lakh and above for tenures of more than 36 months to less than 48 months, more than 48 months to less than 60 months, and 60 months.

The bank has clarified its premature withdrawal rules. Deposits with original tenures between one and three years withdrawn before maturity will earn no interest if closed before completing 12 months. After one year, interest will be paid at the rate applicable when the deposit was booked, without any penalty.

For deposits with original tenures between three and five years, a 12-month lock-in period applies. Withdrawals after the lock-in will attract a 1% penalty, with interest calculated based on the applicable rate at the time of booking.

Why FCNR(B) deposits matter

FCNR(B) deposits allow NRIs to hold fixed deposits in designated foreign currencies such as the US dollar, pound sterling and euro. Since both the principal and interest remain denominated in the foreign currency, investors are protected from fluctuations in the Indian rupee, making these deposits attractive for those looking to earn tax-free interest while avoiding exchange rate risk.

Banks step up foreign currency mobilisation

The RBI's temporary swap support has already resulted in significant foreign currency mobilisation across the banking sector.

According to data shared in a Lok Sabha reply, HSBC has raised the highest amount under the FCNR(B) swap scheme at $6.14 billion, followed by State Bank of India with $4.12 billion and ICICI Bank with $3.70 billion. Standard Chartered Bank ($1.86 billion), Kotak Mahindra Bank ($1.66 billion), Axis Bank ($1.59 billion) and HDFC Bank ($1.41 billion) also reported sizeable inflows.

FCNR(B) Deposit Interest Rates Across Major Banks (3–5 Year Tenure)

What investors should consider

Vishal Goraddia, Fund Manager at Aikyam India Discovery Fund, said FCNR(B) deposits should be viewed as part of an investor's fixed-income allocation rather than a growth investment.

He noted that while the underlying yields are typically in the 6-7% range, FCNR(B) deposits offer eligible NRIs competitive, tax-efficient, dollar-denominated returns without exposing them directly to rupee depreciation. However, he cautioned that investors should avoid shifting money from equities into FCNR(B) deposits solely for higher short-term returns, as doing so could come at the cost of long-term wealth creation. At the same time, such deposits help strengthen foreign currency inflows into the banking system during their tenure.