Non-Resident Indians (NRIs) looking to earn better returns on their savings have received some good news.
Several Indian banks have significantly increased interest rates on foreign currency deposits following recent steps taken by the Reserve Bank of India (RBI).
Major banks including HDFC Bank, Yes Bank, and AU Small Finance Bank have raised deposit rates by as much as 300 basis points in an effort to attract more foreign currency inflows into the country.
The move comes at a time when the Indian rupee is under pressure and foreign exchange reserves are facing challenges.
Banks Offer Higher Returns on NRI Deposits
Among the banks that have revised their rates, HDFC Bank has increased interest rates by 235 to 265 basis points, taking returns up to 6%.
AU Small Finance Bank is now offering 7.1% interest on three-year deposits and 7% on five-year deposits, making it one of the most attractive options currently available.
Yes Bank has also announced higher rates for NRI depositors.
The bank is offering 7% on three-year deposits, 7.05% on four-year deposits, and 7.10% on five-year deposits.
These revised rates are aimed at encouraging NRIs to park more foreign currency funds in Indian banks.
Why Are Banks Increasing Deposit Rates?
The rate hike follows a recent decision by the RBI to relax certain regulatory requirements for banks.
On June 8, the central bank announced that fresh FCNR(B) deposits would be exempt from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements.
FCNR(B), or Foreign Currency Non-Resident Bank deposits, allow NRIs to keep their savings in foreign currencies while earning interest from Indian banks.
RBI’s Move to Attract More Dollar Inflows
The exemption applies to fresh FCNR(B) deposits with maturities between three and five years that are mobilized until September 30, 2026.
By removing CRR and SLR requirements on these deposits, banks can use a larger share of the funds instead of keeping part of them aside as reserves.
This gives banks more flexibility and allows them to offer higher interest rates to NRI customers.
Linked to RBI’s Dollar-Rupee Strategy
The RBI has also introduced a new US Dollar-Rupee swap facility to encourage banks to bring more foreign currency into the country.
The central bank believes that higher foreign currency inflows can help support India’s foreign exchange reserves and reduce pressure on the rupee.
The measure was first announced by RBI Governor Sanjay Malhotra on June 5 as part of a broader plan to strengthen foreign currency inflows and improve liquidity in the financial system.
What It Means for NRIs
For NRIs, the latest rate hikes could be an opportunity to earn significantly better returns on foreign currency deposits.
With some banks now offering interest rates above 7%, FCNR(B) deposits may become a more attractive investment option for those looking for stable returns while keeping funds in foreign currency.
As banks compete to attract overseas deposits, NRIs could see even more attractive offers in the coming months.
