FCNR(B) deposits: IDFC FIRST, IndusInd offer 6.75%; top PSU banks offer 6.60% as RBI forex window nears closure

Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and Persons of Indian Origin (PIOs) looking to invest their foreign currency savings in India have a limited window to take advantage of elevated interest rates on 3-5-year Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits. The special RBI facility that supports the higher rates for these deposits is set to close for FCNR(B) deposits on August 31, 2026.

FCNR(B) deposits attract high rates

The Reserve Bank of India (RBI) had announced in June that the government would bear the hedging cost on 3-5-year FCNR(B) deposits mobilised under the special USD-INR forex swap facility. The move reduced the currency hedging cost for banks and encouraged them to offer more attractive rates on longer-tenure FCNR(B) deposits.

While the facility was initially scheduled to remain available until September 30, the RBI advanced the FCNR(B) window closure to August 31 after strong mobilisation of US dollar deposits.

According to rates advertised on bank websites as of August 17 and compiled by BankBazaar, IDFC FIRST Bank and IndusInd Bank offer the highest rate among the banks listed, at 6.75% on US dollar deposits for tenures of 3-5 years and deposits below $1 million.

Among public-sector banks, Central Bank of India and Punjab National Bank offer 6.60%, while Bank of Baroda, Canara Bank and UCO Bank offer 6.50%.

ICICI Bank, HDFC Bank and Axis Bank offer a maximum rate of 6.25% on the US dollar deposits covered in the comparison.

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Highest FCNR(B) interest rates on US dollar deposits

Source: Bankbazaar

RBI facility draws $72.8 billion

The strong response to FCNR(B) deposits is also reflected in the RBI's latest data. The central bank said on August 22 that its special USD-INR forex swap facility had mobilised $72.848 billion in foreign exchange inflows through FCNR(B) deposits, Overseas Foreign Currency Borrowings (OFCBs) and External Commercial Borrowings (ECBs), based on data reported up to August 21.

FCNR(B) deposits accounted for $65.397 billion, or nearly 90% of the total. OFCBs contributed $4.860 billion and ECBs $2.591 billion. The combined inflows through OFCBs and ECBs stood at $7.451 billion, substantially below the contribution from FCNR(B) deposits.

What happens after August 31?

The higher rates may not disappear immediately after the FCNR(B) window closes, as banks could continue offering existing rates for some time. However, the removal of the special hedging-cost support could reduce the incentive for banks to maintain elevated rates on new 3-5-year deposits.

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An FCNR(B) account allows eligible non-residents to hold deposits in foreign currencies, including US dollars, Australian dollars, Canadian dollars, euros, British pounds and Japanese yen. Interest earned is generally tax-exempt in India, and the deposits offer protection from rupee exchange-rate fluctuations for the foreign currency invested.

The current rates are for deposits below $1 million with 3-5-year tenures and can vary by currency, tenure, deposit size and bank. Investors should check the latest applicable rate and terms directly with the bank before making a deposit.