Banks have seen a gradual surge in overseas funds following the implementation of the Reserve Bank of India’s (RBI) revised Foreign Currency Non-Resident Bank (FCNR-B) deposit scheme. An estimated $3-4 billion has been mobilized through FCNR-B deposits, with expectations of further acceleration in collections this month, driven by increasing awareness among NRIs. The banking sector anticipates a boost in inflows, especially from non-resident Indians in the Gulf region, as per reports.
The revised FCNR-B scheme is projected to attract $40-50 billion in fresh deposits over time, aided by higher interest rates and RBI’s decision to cover banks’ hedging costs. Banks are actively promoting awareness of the revised scheme among overseas depositors, engaging with NRI customers in key markets to encourage participation. Small finance banks are offering interest rates up to 7.5%, while larger banks are providing rates around 6.5% on FCNR-B deposits.
Bankers foresee a substantial contribution to FCNR-B deposits from the Gulf region, fueled by Indian expatriates residing and working there. The renewed interest in FCNR-B deposits follows RBI’s announcement of bearing hedging costs on such deposits with maturities of three to five years, aiming to boost stable foreign currency deposits and support foreign exchange inflows.
RBI’s temporary relaxation of interest rate restrictions on specific non-resident deposits allows banks to offer higher returns on fresh FCNR(B) and NRE deposits, attracting more overseas funds to bolster foreign exchange reserves and strengthen the rupee. The new rules, effective until September 30, 2026, remove interest rate caps on fresh FCNR(B) deposits with maturities over three years and up to five years, as well as on fresh NRE deposits of three years and above. This flexibility enables banks to offer competitive rates to non-resident Indians, enhancing foreign-currency and rupee deposits from global investors and savers.
