Banks register rise in NRI deposits under RBI’s new scheme

Bankers expect inflows to gather pace in the coming weeks, particularly from non-resident Indians based in the Gulf region, the report added.

The revised scheme is expected to attract $40-50 billion in fresh FCNR-B deposits over time, according to bankers. They said higher interest rates and the Reserve Bank of India's decision to bear banks' hedging costs are expected to support deposit mobilisation.

Banks have intensified outreach efforts to raise awareness of the revised FCNR-B scheme among overseas depositors. Lenders are engaging more actively with NRI customers across key overseas markets to encourage participation.

Small finance banks are offering interest rates of up to 7.5 per cent on FCNR-B deposits, while large banks are offering rates of up to 6.5 per cent or so.

Bankers expect the Gulf region to contribute a significant share of incremental FCNR-B deposits, driven by Indian expatriates living and working in the region.

The renewed interest in FCNR-B deposits follows the RBI's announcement in June that it would bear the hedging costs incurred by banks on FCNR-B deposits with maturities of three to five years. The measure is intended to encourage banks to raise more stable foreign currency deposits and support foreign exchange inflows.

The RBI has also temporarily eased interest rate curbs on certain non-resident deposits to enable banks to offer higher returns on fresh FCNR(B) and NRE deposits, with the aim of attracting more overseas funds to prop up the country’s foreign exchange reserves and strengthen the rupee. 

Under the relaxed rules that have been put in place till September 30, 2026, the RBI has withdrawn the interest rate ceiling on fresh Foreign Currency Non-Resident (Bank), or FCNR(B), deposits with maturities of more than three years and up to five years. It has also removed restrictions on interest rates offered on fresh Non-Resident External (NRE) deposits of three years and above.

Before the new rules were rolled out, banks were required to ensure that interest rates on NRE deposits did not exceed those offered on comparable domestic rupee term deposits. FCNR(B) deposits of three to five years were subject to an interest rate ceiling linked to the applicable overnight alternative reference rate or swap rate plus 350 basis points.

The move gives banks more freedom to offer higher interest rates to non-resident Indians, in order to mobilise more foreign-currency and rupee deposits from overseas investors and savers.