Banks have registered a gradual increase in the flow of overseas funds after the rollout of the RBI FCNR-B deposit scheme, and expect collections to accelerate further this month as awareness among Non-Resident Indians (NRIs) continues to grow. The revised scheme is aimed at boosting foreign exchange inflows, strengthening the rupee, and enhancing India’s forex reserves.
RBI FCNR-B Deposit Scheme Drives Growth in NRI Deposits
The banking industry has mobilised an estimated $3-4 billion through FCNR-B deposits so far, according to an NDTV Profit report.
Bankers expect inflows to gather pace in the coming weeks, particularly from non-resident Indians based in the Gulf region.
The revised scheme is expected to attract $40-50 billion in fresh FCNR-B deposits over time, according to bankers. They said higher interest rates and the Reserve Bank of India’s decision to bear banks’ hedging costs are expected to support deposit mobilisation. The policy is expected to make FCNR-B deposits more attractive for overseas Indians seeking better returns.
Banks have intensified outreach efforts to raise awareness of the revised FCNR-B scheme among overseas depositors. Lenders are engaging more actively with NRI customers across key overseas markets to encourage participation.
Higher Interest Rates Attract Overseas Indian Investors
Small finance banks are offering interest rates of up to 7.5 per cent on FCNR-B deposits, while large banks are offering rates of up to 6.5 per cent.
Bankers expect the Gulf region to contribute a significant share of incremental FCNR-B deposits, driven by Indian expatriates living and working in the region. The Gulf remains one of the largest sources of remittances and NRI banking deposits for India.
The renewed interest in FCNR-B deposits follows the RBI’s announcement in June that it would bear the hedging costs incurred by banks on FCNR-B deposits with maturities of three to five years. The measure is intended to encourage banks to raise more stable foreign currency deposits and support foreign exchange inflows.
RBI Relaxes Rules to Strengthen Forex Reserves
The RBI has also temporarily eased interest rate restrictions on certain non-resident deposits to enable banks to offer higher returns on fresh FCNR(B) and NRE deposits, with the aim of attracting more overseas funds to strengthen India’s foreign exchange reserves and support the rupee.
Under the relaxed rules, effective until September 30, 2026, the RBI has withdrawn the interest rate ceiling on fresh FCNR(B) deposits with maturities of more than three years and up to five years. It has also removed restrictions on interest rates offered on fresh Non-Resident External (NRE) deposits of three years and above.
Before the new rules, banks had to ensure that interest rates on NRE deposits did not exceed comparable domestic rupee term deposits, while FCNR(B) deposits were subject to a capped interest rate formula.
The move gives banks greater flexibility to offer attractive returns to NRIs, helping mobilise more foreign currency and rupee deposits from overseas investors and savers. Industry experts expect the revised RBI FCNR-B deposit scheme to support stronger capital inflows in the coming months.
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