The Reserve Bank of India has exempted banks from maintaining statutory reserve ratios on fresh Non-Resident (External) Rupee (NRE) term deposits of three years or more mobilised between June 19, 2026 and September 30, 2026 as part of its limited period measures to attract foreign capital. The exemption from cash reserve ratio (CRR) currently at 3% of a bank's deposits and statutory liquidity ratio (SLR) at 18% of a bank's deposits will encourage banks to offer higher interest rates on deposits as they will be able to deploy the full deposit proceeds as loans. For every ₹100 deposit mobilised by a bank, it could previously give out ₹79 as a loan, with ₹3 parked with RBI as CRR and ₹21 invested in government securities. Now, with the exemption, banks can give the full deposit amount mobilised as a loan. The exemption from maintenance of CRR and SLR will be available from the reporting fortnight beginning July 16, 2026 (based on the NDTL/net demand and time liability computation as on June 30, 2026) and subsequent fortnights thereafter.
The Reserve Bank of India has mandated daily reporting of Foreign Currency Non-Resident (FCNR-B) deposits, external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) mobilised under its concessional swap facilities. According to Business Standard, all authorised dealer category-I banks have been asked to furnish the data by 6 pm every day, including nil statements on days when no transactions take place, except on Saturdays and holidays. The RBI said details of FCNR-B deposits, ECBs and OFCBs mobilised since June 8, 2026, when the swap facilities were announced, should be reported along with the first submission due on June 22, 2026. The information is required to be submitted separately in prescribed formats to designated RBI email addresses.
Recent Central Bank reforms have significantly enhanced investment opportunities for NRIs, particularly benefiting UAE-based professionals. The government is temporarily absorbing hedging costs on certain FCNR(B) deposits, potentially increasing returns on foreign currency deposits. Individual investment limits have been increased from 5% to 10% in listed companies, while aggregate foreign individual limits have risen from 10% to 24%. These reforms create a simplified fund-flow mechanism that allows investors to use a single designated repatriable rupee account for investing in Indian shares and other eligible assets, with money remaining in the account for reinvestment after tax payments. The latest RBI move to remove rate caps until September 2026 further enhances these opportunities by allowing banks to offer competitive rates that may match or exceed local deposit rates, with many banks expected to announce special schemes in the coming weeks as they review their NRI deposit offerings.
Indian banks are seeking clarity from the RBI on allowing overseas branches to lend to non-residents for FCNR(B) deposits. According to The Economic Times, several lenders have sought clarity on whether they can raise FCNR(B) deposits by extending loans to non-residents through their overseas branches. Several banks, including the State Bank of India (SBI), are already offering structured leveraged products that allow customers to raise foreign currency demand loans to create FCNR(B) deposits, with the deposits pledged as collateral. A senior SBI official confirmed that "This product has been launched selectively abroad after ensuring there is nothing against regulations" and noted that "there was some ambiguity over whether leverage will be allowed, but after due checks it is clear the RBI has not barred a leveraged deposit in the latest FCNR (B) scheme." The RBI's bespoke swap facility, which came into effect on June 8, is open up to October 16 for deposits mobilised until September 30. Banks could offer up to nine times leverage on a $1 million deposit, promising 14.08% yields compared with the upfront offer of 6% dollar-based interest on five-year lock-ins.
Banking stocks such as HDFC Bank, ICICI Bank, State Bank of India, Axis Bank, and IndusInd Bank are expected to be in focus as the RBI's latest measures provide greater flexibility for NRI deposit mobilization. As reported by Business Standard, banking industry sources indicated the central bank's decision to temporarily withdraw the interest-rate ceiling on fresh FCNR(B) deposits in the three-to-five-year maturity bucket followed requests from smaller banks. Banks with large overseas customer bases and established NRI banking franchises could benefit the most from this relaxation, which could help them attract deposits more effectively, strengthen their funding base, and improve liquidity. The move is being viewed as a positive development for banks, particularly those with strong NRI deposit franchises, though the benefits are likely to be indirect and may not immediately translate into higher earnings.
Among major lenders, State Bank of India (SBI), HDFC Bank, ICICI Bank and Axis Bank currently offer rates of up to 6% on FCNR(B) deposits with maturities ranging from three to five years. As reported by Business Standard, Bank of Baroda (BoB) further raised interest rates on FCNR(B) deposits by up to 50 basis points on Tuesday, offering a peak rate of 6.25% on five-year deposits. Some smaller private-sector banks are offering higher rates than larger lenders, with Yes Bank offering up to 6.6% on five-year FCNR(B) deposits and AU Small Finance Bank offering a peak rate of 7.1% on such deposits. CSB Bank increased rates on deposits with maturities of three years to less than four years by 290 basis points to 6.95%. A senior executive at a private-sector bank indicated that while banks can offer up to 7.5% without the ceiling, it's unlikely they will go beyond 7%-7.10%, with most banks having already raised rates to attractive levels in the 6%-7% range.
