Bank That Offers Highest FCNR(B) Rate After RBI Withdrew Interest Rate Ceiling For 3-5 Years Deposits

After the Reserve Bank of India’s (RBI’s) recent measures to encourage foreign currency investments by Non-resident Indian (NRIs) in the June monetary policy meeting, several banks have revised and raised their Foreign Currency Non-Resident (Banks) or FCNR(B) deposit rates.

The RBI announced to bear not only the foreign exchange hedging cost but also to remove the interest rate ceiling on FCNR(B) deposits until September 30, 2026. While the FCNR tenures started from one year, this specific incentive is only for 3-5 year tenures for those deposits that are mobilised before the deadline.

Now, to benefit from the measure, several banks have raised their FCNR deposit rates, reaching as high as 7.5 per cent, which used to hover around 4 per cent before the RBI’s announcement.

What Is FCNR(B) Deposit?

The FCNR(B) account is a fixed deposit available for NRIs, Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs). They can open FNCR(B) with banks in permitted currencies, which typically include the US dollar (USD), British pound (GBP), Canadian dollar (CAD), Australian dollar (AUD), Japanese Yen (JPY), and Singapore dollar (SGD).

Although they also have the option to open a Non-Resident External (NRE) fixed deposit account, that account will be maintained in rupees, where foreign currency will first be converted into rupees, and then the FD will be created. FCNR(B) is opened in the foreign currency only, and thus, the original denomination remains the same. There is no rupee exposure, and therefore, the account holders can avoid the risk of exchange rate fluctuations and earn risk-free returns. Another benefit of FCNR is that the principal and interest are both entirely tax-free and fully repatriable. This is the reason experts see this as an opportunity for those having surplus funds to earn risk-free, tax-free returns.

Let us see which banks have revised FCNR(B) deposit rates for less than USD 1 million FCNR(B) deposits, and which bank is providing the highest rate?

Premature Withdrawal

As these are special rates in many cases, the banks have a one-year lock-in period for these FCNR deposits. A premature withdrawal after one year but before the completion of the tenure for which it was made will attract a penalty.