AU Small Finance Bank has announced the enhancement of its Non-Resident Indian deposit offerings by revising interest rates on both Foreign Currency Non-Resident (FCNR(B)) Deposits and Non-Resident External (NRE) Fixed Deposits, effective July 27, 2026. The bank has increased the peak interest rate on FCNR(B) Deposits from 7.10% p.a. to 7.40% p.a. for the 3 to 4-year tenure, while the peak rate on NRE Fixed Deposits has been revised from 7.00% p.a. to 7.60% p.a. for the 36 Months 1 Day to 45 Months tenure. Interest on FCNR deposits is paid out semi-annually, as reported by AU Small Finance Bank. The revision is further supported by the RBI's announcement dated June 8, 2026 (RBI/2026-27/99 FMOD.MAOG.No.S-56/01.06.016/2026-27), which provides additional headroom for banks to offer more competitive foreign currency deposit rates.
AU Small Finance Bank continues to offer zero forex margin and zero bank charges on eligible inward and outward remittances, providing comprehensive banking services to NRI customers. The revised rates are available to both new and existing customers through the bank's extensive network of 2,920 banking touchpoints across 21 states and 4 Union Territories, serving 1.2+ crore customers. Customers can access these services through multiple digital platforms including the AU 0101 App, WhatsApp Banking and 24x7 Video Banking. For detailed tenure-wise interest rates, customers can visit the bank's official website at https://www.au.bank.in/interest-rates/au-fcnr.
While FCNR deposits have emerged as popular investment options for NRIs with rates exceeding 7 percent annually, banks impose varying premature withdrawal rules that NRIs must understand. State Bank of India does not allow premature withdrawal during the first year, paying 3.5 percent interest if withdrawn between one and three years, and 1 percentage point lower than applicable rates for withdrawals between three and five years. Bank of Baroda offers up to 6.5 percent annually but pays no interest if withdrawn within the first 12 months, while HDFC Bank provides up to 6 percent with no penalty but uses the lower applicable rate for the actual deposit period. ICICI Bank offers up to 6 percent with no penalty for withdrawals after one year, while Kotak Mahindra Bank charges 0.25 percent for deposits under three years and 1 percent for deposits with three to five-year tenures. These rules vary significantly across banks, making it crucial for NRIs to carefully evaluate their withdrawal strategies before investing.
Small and mid-sized banks are implementing aggressive interest rate strategies to compete for foreign currency non-resident (FCNR) deposits amid intense competition from larger institutions. According to reports from The Hindu BusinessLine, these banks are overcoming their inability to offer leverage to NRI customers by increasing deposit rates to retain customers and prevent migration to other financial institutions. The banks are playing the 'interest rate' gambit to ensure they don't get left behind in the race to mobilise fresh foreign currency non-resident deposits. As reported by AU Small Finance Bank, FCNR deposits remain a key channel for mobilising overseas Indian savings into India, while offering protection against exchange rate fluctuations. The competitive landscape has intensified with AU Small Finance Bank's 7.60% NRE FD rate now among the most competitive offerings available for NRI depositors in India.
The interest rates offered by these banks are significantly higher than large banks. As reported by The Hindu BusinessLine, the rates quoted by small banks are on average about 150 basis points higher than those offered by major banks such as State Bank of India, HDFC Bank and ICICI Bank. According to the latest data, AU Small Finance Bank's 7.40% peak FCNR(B) rate is among the highest currently available in the banking sector, with State Bank of India offering up to 6% on FCNR(B) deposits in US dollars for maturities of three to five years. RBL Bank has also revised its FCNR(B) rates, offering up to 6.35% on five-year US dollar deposits, while providing differentiated rates across currencies and maturities. The enhanced competition has made NRE FDs at 7.60% particularly attractive, as interest earned on these deposits is completely exempt from Indian income tax, making them effectively better than taxable FDs for high-bracket residents. Meanwhile, global banks are also adapting to capture diaspora capital, with HSBC securing $5.5 billion in NRI deposits through innovative leverage strategies, highlighting the growing importance of this segment in the international banking landscape.
