Major banks slash FCNR deposit rates from September 1: HDFC Bank, SBI, PNB, Axis Bank rates compared

Several major banks, including HDFC Bank, ICICI Bank, State Bank of India (SBI), Punjab National Bank (PNB), Axis Bank and Kotak Mahindra Bank, have sharply reduced interest rates on Foreign Currency Non-Resident (FCNR) deposits from September 1, 2026. The rate cuts follow the withdrawal of a special government hedging subsidy for 3–5 year FCNR deposits.

The government had announced in June 2026 that it would bear the hedging costs on 3–5 year FCNR deposits until September 30, 2026, as part of efforts to attract more dollar inflows into India. Banks subsequently raised rates significantly on these deposits, with some offering interest rates of as much as 6–6.5%.

However, the response from non-resident depositors was stronger than expected, resulting in a substantial inflow of US dollar deposits. In view of the strong response, the government advanced the end date for the hedging support to August 31.

The scale of the response is evident from the latest provisional data released by the Reserve Bank of India (RBI). Inflows through the special FCNR-B deposit scheme have crossed the $100-billion mark, with $127.2 billion coming through the special concessional swap window.

When inflows through external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) are also included, total inflows stood at $136.3 billion, well above market estimates of at least $90 billion. Of this, $3.8 billion came through the ECB route and $5.2 billion through the OFCB route, according to the data.

Banks have now rolled back the higher rates from September 1.

FCNR deposit rates: Old vs new

HDFC Bank has reduced its earlier peak rate of 6.25% to 3.50% for deposits with a maturity of three to four years and 3.15% for four to five years. ICICI Bank has cut its rate from 6.25% to 3.25% across the three-to-five-year band.

SBI, which had offered up to 6% on five-year deposits above $1 million, now offers 3.35% for three to four years, 2.95% for four to five years and 3.05% for five years.

PNB has lowered its rate from 6.50% to 3.06% on five-year deposits under $1 million, while its three-to-four-year rate has fallen from 6.40% to 3.25%. Axis Bank has reduced its rates to 3.25% for three to four years and 2.95% for four to five years on deposits below $1 million.

Kotak Mahindra Bank has also cut rates substantially, from an earlier 6.30% on five-year deposits above $0.5 million to 3% for the same tenure.

What is an FCNR account?

An FCNR account allows NRIs, OCIs and PIOs to hold fixed deposits in foreign currency. These deposits offer tax-free interest, easy repatriation and protection against exchange-rate fluctuations, making them an important option for overseas Indians seeking to park foreign-currency savings in India.