Non-Resident Indians (NRIs) looking for better returns on their overseas savings have a reason to smile.
Several banks have increased interest rates on FCNR(B) deposits after the Reserve Bank of India (RBI) announced measures to encourage foreign currency inflows into the country.
As a result, some banks are now offering interest rates of up to 7.1% on US dollar deposits, making FCNR accounts more attractive than before.
What Is an FCNR(B) Deposit?
An FCNR(B) deposit is a fixed deposit account designed for NRIs.
It allows them to keep their foreign earnings in India in currencies such as the US Dollar, Pound Sterling, Euro, Australian Dollar and others.
One of the biggest advantages of these deposits is that the money remains in foreign currency, reducing the impact of fluctuations in the Indian rupee.
Bandhan Bank Offers the Highest Rate
Among major banks, Bandhan Bank is currently offering one of the highest interest rates on FCNR(B) deposits.
The bank is providing up to 7.1% interest on US dollar deposits of $1 million or more for tenures ranging from three to five years.
For deposits below $1 million, the interest rate is 7%.
According to the bank, these rates allow NRIs to lock in attractive returns while reducing currency-related risks.
PNB and South Indian Bank Also Increase Rates
Punjab National Bank (PNB) has also revised its FCNR(B) deposit rates across multiple foreign currencies.
For deposits below $1 million, PNB is offering up to:
6.5% on US Dollar deposits
6.5% on Pound Sterling deposits
4.95% on Euro deposits
4.9% on Canadian Dollar deposits
5.5% on Australian Dollar deposits
For deposits above $1 million, these rates increase further, with US Dollar and Pound Sterling deposits earning up to 6.6%.
Meanwhile, South Indian Bank is offering 6.5% interest on US Dollar FCNR(B) deposits with tenures between three and five years.
Smaller Banks Are Offering Even Better Returns
Several private and small finance banks are offering rates that are higher than many large banks.
AU Small Finance Bank is matching Bandhan Bank’s top rate of 7.1% on five-year FCNR(B) deposits.
CSB Bank has increased its interest rate to 6.95% for deposits with maturities between three and four years.
Yes Bank is offering up to 6.6% on five-year FCNR(B) deposits, while Equitas Small Finance Bank has also revised its rates upward for NRI customers.
How Do Large Banks Compare?
India’s largest banks are still offering comparatively lower returns on FCNR(B) deposits.
State Bank of India, HDFC Bank, ICICI Bank and Axis Bank are currently offering around 6% interest on deposits with tenures between three and five years.
Bank of Baroda recently increased its rates and is now offering up to 6.25% on five-year FCNR(B) deposits.
Why Are Banks Raising Interest Rates?
The recent increase in rates follows a special initiative by the RBI.
The central bank has introduced a USD-Rupee forex swap facility for banks on fresh FCNR(B) deposits with maturities between three and five years.
This allows banks to manage currency risk more effectively while attracting more foreign currency deposits.
In addition, the RBI has temporarily removed the interest rate ceiling on fresh FCNR(B) deposits with tenures of three to five years until September 30.
Similar relaxation has also been provided for certain NRE deposits.
These measures are aimed at bringing more foreign capital into India.
What Does This Mean for NRIs?
The latest rate hikes have made FCNR(B) deposits much more attractive for NRIs looking for stable and relatively higher returns.
With some banks now offering interest rates above 7% on US dollar deposits, NRIs have an opportunity to earn better returns while avoiding direct exposure to rupee fluctuations.
For those planning to invest their overseas earnings in India, comparing FCNR(B) rates across banks could help secure significantly higher returns over the next three to five years.
