State Bank of India (SBI), Bank of Baroda (BoB), and ICICI Bank have significantly increased interest rates on their Foreign Currency Non-Resident (Bank) or FCNR(B) deposits, offering Non-Resident Indians (NRIs) returns of up to 7 percent on US dollar deposits. According to reports from Business Standard, the revised rates mark a sharp increase from the earlier levels of around 3.35 percent on long-term US dollar deposits, representing an increase of 265 basis points. This move comes after the Reserve Bank of India announced measures aimed at boosting foreign currency inflows into the country, with the central bank recently easing regulations relating to FCNR(B) deposits and overseas borrowings. The revised rates will come into effect from June 11, as reported by multiple sources. Within a week of the RBI's announcement, most banks hiked rates on these deposits, with HDFC Bank, ICICI Bank, Axis Bank and Bank of Baroda now offering a peak rate of 6% on three-to-five-year deposits, in some cases representing a jump of close to 300 basis points from previous levels.
Bank of Baroda has introduced a special FCNR(B) deposit scheme offering up to 6% interest on a 5-year maturity period. Under the scheme, customers can earn up to 6 percent on USD deposits, 4.75 percent on GBP and AUD deposits, 5.15 percent on CAD deposits and 3.75 percent on Euro deposits. Bank of Baroda's revised rates for 3 years and above but less than 4 years is 5.50%, while for 4 years and above but less than 5 years it is 5.75%. On deposits for 5 years, the rate is set at 6%. ICICI Bank is offering 6% across all tenures between 3 years and 5 years on their FNCR(B) deposits, effective June 11. SBI's rates for 3 years and above but less than 4 years is 5.25%, while for 4 years and above but less than 5 years, it is 5.5%. On deposits for 5 years, the rate is set at 5.75%. For deposits of up to USD 1 Million, there is no additional rate. For deposits above USD 1 million, there is an additional rate of 0.25% across respective tenures.
The special FCNR(B) deposit scheme comes after the RBI unveiled a series of measures to encourage foreign currency inflows, including a special swap facility for FCNR(B) deposits under which the central bank will absorb the hedging cost for eligible deposits. This facility is available for deposits mobilised up to September 30 and is expected to support reserve accumulation and rupee stability. According to DBS Bank economist Radhika Rao, the RBI's FCNR(B) and external commercial borrowing (ECB) swap facilities could collectively bring in incremental inflows of $50-60 billion, helping narrow India's balance of payments gap, support foreign exchange reserves and stabilise the rupee. The move has prompted several lenders to revise their FCNR(B) deposit rates, with banks including HDFC Bank, Punjab National Bank, Central Bank of India, Karur Vysya Bank and AU Small Finance Bank increasing rates on FCNR(B) dollar deposits in the three-to-five-year maturity segment to attract overseas deposits. Uttam Tibrewal, deputy CEO of AU Small Finance Bank, noted that recent regulatory measures have meaningfully optimised hedging economics for banks, enabling them to offer significantly higher rates to NRI customers.
Kotak Mahindra Bank has emerged as a standout performer, raising interest rates on such deposits to as much as 6.15% for deposits above $1 million with maturities of three to five years, while deposits below $1 million in the same maturity bucket will earn 6%. Yes Bank has also raised its peak FCNR(B) deposit rate to 6.6% for a five-year tenor, while deposits with maturities of three to four years will earn interest rates ranging from 6.5% to 6.55%. CSB Bank has sharply increased its deposit rates, raising the rate with maturities of three years to less than four years by 290 bps to 6.95%. As per CSB Bank MD & CEO Pralay Mondal, the swap window helps banks raise FCNR(B) deposit rates closer to domestic deposit rates and remove stress from short-term domestic rates, benefiting both NRIs and banks. BoB Executive Director Beena Vaheed noted that the new deposit scheme provides NRIs with an attractive opportunity to earn enhanced returns on their foreign currency deposits.
UCO Bank is providing 7.20% on five-year FCNR(B) deposits and 6.66% on three-year deposits, leading the rate competition among smaller lenders. DCB Bank is offering 7.13% for both three-year and five-year tenures, while CSB Bank is providing 6.95% for three years and 7.05% for five years. Bandhan Bank has announced a flat 7% rate for both three-year and five-year deposits, and Karnataka Bank is offering 6.50% for three years and 7% for five years. Among large private sector lenders, ICICI Bank, Axis Bank and Federal Bank are offering 6% on both three-year and five-year FCNR(B) deposits. Punjab National Bank (PNB) is offering 6.00% on three-year FCNR(B) deposits and 6.10% on five-year deposits. Other lenders have also revised rates upward, with IDBI Bank offering 6.00-6.10% for three-year deposits and 6.10-6.20% for five-year deposits, YES Bank providing 6.50% and 6.60% respectively, and Canara Bank offering 6.50% for both tenures.
