The Reserve Bank of India has introduced a special facility aimed at attracting foreign currency deposits from non-resident Indians (NRIs), potentially making Foreign Currency Non-Resident (Bank) or FCNR(B) deposits more attractive over the coming months.
Under the scheme announced on June 8, banks can mobilise fresh FCNR(B) deposits until September 30 and swap the underlying US dollars with the RBI. The facility, available for deposits with maturities of three to five years, is intended to strengthen foreign exchange liquidity and encourage overseas Indians to place their dollar savings with Indian banks.
The move is similar to a successful FCNR(B) mobilisation programme launched in 2013, although the current objective is more focused on boosting foreign currency inflows and maintaining adequate forex liquidity amid global uncertainties.
FCNR(B) deposits are foreign currency fixed deposits available to NRIs and Overseas Citizens of India (OCIs). Unlike Non-Resident External (NRE) deposits, which are maintained in rupees, FCNR(B) deposits are held in foreign currencies such as US dollars, euros or pounds sterling. Both principal and interest are repaid in the same foreign currency, protecting investors from rupee depreciation.
Under the RBI's special facility, banks can exchange the dollars collected through FCNR(B) deposits with the central bank at a fixed exchange rate and reverse the transaction at maturity. This reduces the currency-hedging costs normally borne by banks when raising foreign currency deposits.
Because banks face lower funding costs, they may be able to offer more attractive interest rates on FCNR(B) deposits. However, the RBI has not prescribed any specific rate, leaving banks free to decide pricing based on their own policies.
Eligible deposits must have a tenure of at least three years and not more than five years. The deposits will carry a mandatory one-year lock-in period, although premature withdrawal may be allowed thereafter according to individual bank policies.
The scheme applies to fresh deposits mobilised between June 8 and September 30, 2026, including eligible renewals. While banks may accept deposits in various freely convertible currencies, the RBI's swap facility will be available only for US dollar transactions.
The scheme could be particularly attractive for NRIs holding idle dollar balances and seeking stable returns without taking currency risk. However, experts say investors should compare the rates eventually offered by banks with returns available on overseas deposits, US Treasury securities and other dollar-denominated investments.
The success of the initiative will ultimately depend on how competitive the interest rates offered by banks turn out to be. If lenders pass on much of the benefit from the RBI's swap facility, FCNR(B) deposits could emerge as a preferred savings option for many NRIs.
