FCNR(B) deposits are currently offering some of the highest interest rates in the market, with IDFC FIRST Bank and IndusInd Bank leading at 6.75% each on US dollar deposits. ICICI Bank, HDFC Bank, and Axis Bank are offering their highest rates at 6.25% each for Non-Resident Indians, Overseas Citizens of India, and Persons of Indian Origin. Among public sector banks, Central Bank of India is offering the highest rate at 6.60%, while Bank of Baroda, Canara Bank, and UCO Bank are providing 6.50% interest rates each. Punjab National Bank's highest rate stands at 6.45%. These rates are primarily available for deposits below USD 1 million with tenures of 3-5 years, as reported by BankBazaar and IDFC FIRST Bank.
The current favorable interest rate environment is primarily driven by the RBI's announcement in June that the government would bear the hedging costs on 3-5-year FCNR(B) deposits. This relief has enabled banks to offer significantly higher interest rates compared to previous periods. The RBI swap window was originally available till September 30, 2026, but as FCNR(B) deposits drew huge USD deposits, the government advanced the deadline to August 31, 2026. However, 12 days remain until the deadline, providing NRIs, OCIs, and PIOs with limited time to avail these benefits. Banks may not cut FCNR(B) rates immediately on 3-5-year tenors even if the deadline passes, meaning investors can still benefit from high rates for some additional days.
Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) can open and maintain Foreign Currency Non-Resident Bank (FCNR(B)) accounts jointly with eligible resident relatives, according to information available on the State Bank of India (SBI) website. However, the most important condition is that the account must be operated on a 'Former or Survivor' basis, with the NRI, Person of Indian Origin (PIO) or OCI being the first holder. As reported by IDFC FIRST Bank, NRIs can open joint accounts with other NRIs as well as with resident Indians, but when a resident is added as a joint holder, the account must operate on this basis, and only one resident can be included as a joint account holder. The money for these accounts should be sourced from international transfers or existing Indian accounts. According to the latest guidance, NRE accounts can be held jointly with another NRI, or with a resident close relative on a 'former or survivor' basis', meaning the resident relative operates it during your lifetime only as a power-of-attorney holder (limited to local payments and remittances to you), and takes it over fully only as survivor. Joint accounts can be opened by two or more NRIs and/or PIOs or by an NRI/PIO with a resident relative(s) on 'former or survivor' basis, as specified in RBI Master Direction No.14/2015-16, with the resident relative operating the account only as a Power of Attorney holder during the NRI/PIO account holder's lifetime.
According to SBI rules, eligible resident relatives include members of a Hindu Undivided Family, a husband and wife, and persons related in the prescribed manner. The specified relatives include father (including step-father), mother (including step-mother), son (including step-son), son's wife, daughter, daughter's husband, brother (including step-brother), and sister (including step-sister). This means an NRI may be able to add an eligible close family member residing in India as a joint holder, provided the applicable conditions are met and the prescribed operating arrangement is followed. As per IDFC FIRST Bank, eligible resident relatives include immediate family members and their spouses. The latest guidance confirms that parent's gifts belong in your NRO account, where rupee gifts from resident close relatives are both permitted and, between specified relatives, outside the gift-tax net. During the lifetime of the NRI/PIO account holder, the resident relative can operate the account only as a Power of Attorney holder, with specific limitations on account operations.
One of the key benefits of an FCNR(B) deposit is that both the principal amount and interest earned are exempt from income tax in India. The funds held in the deposit are fully and freely repatriable, meaning that both the principal and accrued interest can be transferred outside India, subject to applicable rules. For NRIs, an FCNR(B) deposit can offer a way to hold foreign currency savings in India while potentially allowing an eligible resident family member to be associated with the account for easier administration, provided the prescribed 'Former or Survivor' mode and other applicable banking conditions are followed. The tax exemption on NRE interest ends when your FEMA residency ends, though returning NRIs who qualify for RNOR (Resident but Not Ordinarily Resident) status retain a parallel exemption on FCNR and RFC interest under Section 10(15)(iv)(fa) until RNOR status runs out, typically two to three years. Interest on NRE and FCNR deposits is exempt from tax in India; hence, no TDS will be deducted, while interest on NRO accounts is taxable, and TDS will be applied as per the Income Tax Act, 1961 and applicable rules. The accounts are not sealed compartments, but the doors between them swing in specific directions - money you earn abroad and send to India belongs in NRE or FCNR(B), while money that arises in India must go to NRO first.
**Under the RBI's rules for non-resident accounts, you may repatriate up to USD 1 million per financial year from NRO balances (April to March), on top of current income like rent and dividends, which is remittable without limit once Indian taxes on it are paid. Moving money out of NRO also requires a chartered accountant's certificate on Form 15CB and a self-declaration on Form 15CA in most cases — a procedural step that surprises people who expected a simple bank transfer. The practical rule compresses to one line: if there is any chance you'll want this money outside India someday, fund the investment from NRE, even when the NRO balance is sitting right there looking convenient. The caveat: 'tax-free' means tax-free in India only. If you're a US tax resident, NRE and FCNR interest is fully taxable on your US return — the IRS does not care what Section 10(4)(ii) says, and the same applies to UK residents (unless the 4-year FIG regime for new arrivals shelters it), and to residents of Canada and Australia. Gulf-based NRIs are the ones who genuinely pocket NRE interest tax-free, since the UAE and Saudi Arabia levy no personal income tax. Under the RBI's rules, you may repatriate up to USD 1 million per financial year from NRO balances, with the practical limitation that if there is any chance you'll want this money outside India someday, fund the investment from NRE.
