Summary of this article
FCNR(B) deposits let NRIs hold fixed deposits in foreign currencies.
RBI's special swap window drove a sharp rise in inflows.
Deposits offer foreign-currency returns without rupee conversion exposure.
Banks have raised $65.4 billion through foreign currency non-resident (bank) or FCNR (B) deposits as on August 21, 2026. The inflows have added rupee funds to the banking system, taking surplus liquidity to Rs 6.65 trillion, its highest level since April 2022. With FCNR (B) deposits playing a larger role in the banking system, here is what these deposits are, who can open them and how they work.
What is an FCNR (B) Deposit
FCNR (B) are fixed deposits meant for eligible non-residents, mainly non-resident Indians (NRIs) and eligible persons of Indian origin (PIOs) living outside India. The key difference between an FCNR (B) and non-resident external (NRE) deposit is the currency in which the money is held. An FCNR (B) deposit is held in a foreign currency, rather than in Indian rupees.
The Reserve Bank of India (RBI) permits FCNR (B) deposits in dollar, pound sterling, euro, Japanese yen, Canadian dollar and Australian dollar.
Who Can Open an FCNR(B) Deposit
Eligible non-residents can open an FCNR(B) account with an authorised bank. The deposit can be funded through permitted foreign-currency remittances from abroad. Transfers from an eligible NRE account or another FCNR (B) account of the same account holder are also permitted.
The deposit can have a maturity period of 1-5 years.
How does the Deposit Work
Let’s say an NRI has savings in dollars. Instead of converting those dollars into rupees and opening an NRE fixed deposit, the NRI can place the dollars in a dollar FCNR (B) deposit.
The principal and interest are maintained in the chosen foreign currency. Both can be repatriated, subject to the applicable rules.
This also means the depositor does not take the same rupee-to-foreign-currency conversion exposure that comes with a rupee-denominated deposit.
How Much Interest Can Banks Offer on FCNR (B) Deposits
Banks decide the deposit rate on FCNR (B) deposits within RBI’s prescribed limits. RBI had temporarily removed the interest-rate ceiling for fresh FCNR (B) deposits with a three-year to five-year maturity from June 17, 2026, as part of its measures to attract foreign-currency inflows into India.
For deposits outside such temporary relaxations, the applicable RBI ceiling is linked to the relevant overnight reference rate for the currency and the maturity.
Is the Interest Taxable
Interest on FCNR (B) deposits is exempt from Indian income tax for eligible persons under the applicable tax provisions. The exemption depends on the person’s residential status and eligibility.
Banks can also provide loans or advances against FCNR (B) deposits, subject to applicable rules.
What if You Withdraw Early
The deposit needs a minimum one-year maturity to earn interest. If withdrawn before one year, no interest is payable on the deposit. A bank can also impose a penalty for eligible premature withdrawals after one year, according to its terms.
What if the NRI Returns To India
If the depositor becomes a resident in India, the FCNR (B) deposit can, subject to RBI rules, run until maturity at the contracted rate. After maturity, the money can be transferred to an appropriate resident account or, where eligible, a resident foreign currency account.
