FCNR-B deposits cross $3-4 billion as RBI scheme draws NRI funds
Synopsis
Indian banks have already pulled in $3–4 billion under the RBI's revamped FCNR-B scheme — and the real surge may be just weeks away. With hedging costs now borne by the RBI and interest rate ceilings lifted until September 2026, small finance banks are offering NRIs up to 7.5%, and the Gulf diaspora is the primary target for what bankers believe could eventually total $40–50 billion in inflows.
Key Takeaways
Indian banks have mobilised an estimated $3–4 billion in FCNR-B deposits since the RBI revised the scheme.
The banking sector expects total inflows of $40–50 billion over time under the revised framework.
The RBI is bearing banks' hedging costs on FCNR-B deposits with maturities of three to five years .
Interest rate ceilings on fresh FCNR-B and NRE deposits have been temporarily lifted until 30 September 2026 .
Small finance banks are offering up to 7.5% ; large banks up to approximately 6.5% on FCNR-B deposits.
The Gulf region is expected to contribute the largest share of incremental NRI deposits.
Indian banks have recorded a steady rise in overseas fund inflows since the Reserve Bank of India (RBI) rolled out its revised Foreign Currency Non-Resident Bank (FCNR-B) deposit scheme, with the banking sector having mobilised an estimated $3–4 billion so far. Bankers expect collections to accelerate through July 2025 as awareness among non-resident Indians continues to grow, particularly in the Gulf region.
Key Developments
The revised FCNR-B scheme is expected to attract $40–50 billion in fresh deposits over time, according to bankers. Two RBI measures are driving the momentum: the central bank's decision to bear hedging costs on FCNR-B deposits with maturities of three to five years, and a temporary relaxation of interest rate ceilings that remains in place until 30 September 2026.
Under the eased rules, the RBI has withdrawn the interest rate ceiling on fresh FCNR-B deposits with maturities of more than three years and up to five years. It has also removed restrictions on interest rates offered on fresh Non-Resident External (NRE) deposits of three years and above. Previously, NRE deposit rates could not exceed those on comparable domestic rupee term deposits, while FCNR-B rates were capped at the applicable overnight alternative reference rate or swap rate plus 350 basis points.
What Banks Are Offering
Small finance banks are currently offering interest rates of up to 7.5% on FCNR-B deposits, while large banks are offering rates of up to approximately 6.5%. Lenders have intensified outreach efforts across key overseas markets to encourage NRI participation, engaging more actively with diaspora communities to raise scheme awareness.
Why the Gulf Region Matters
Bankers expect the Gulf region to contribute a significant share of incremental FCNR-B inflows, driven by the large Indian expatriate workforce living and working across UAE, Saudi Arabia, Kuwait, and neighbouring countries. The Gulf diaspora has historically been among the largest sources of remittances and foreign currency deposits into India.
RBI's Broader Objective
The RBI's revised framework is designed to attract more stable foreign currency deposits, bolster the country's foreign exchange reserves, and support the rupee. By absorbing banks' hedging costs and freeing interest rate ceilings, the central bank has effectively made FCNR-B deposits more commercially viable for lenders and more attractive for overseas depositors. The announcement of the hedging cost relief was made in June 2025.
With awareness still building and Gulf-based outreach intensifying, bankers anticipate that the pace of deposit mobilisation will pick up meaningfully in the weeks ahead.
Point of View
Which explains why lenders are now actively marketing it rather than treating it as a compliance exercise. The $40–50 billion target is ambitious: the 2013 FCNR-B mobilisation under then-Governor Raghuram Rajan raised roughly $34 billion in a crisis-driven window. This time, the context is more gradual and the rupee pressure less acute, which means the scheme's success will depend almost entirely on how effectively banks convert Gulf diaspora outreach into actual deposits before the September 2026 deadline.
NationPress
3 Jul 2026
Frequently Asked Questions
What is the revised FCNR-B deposit scheme?
The Foreign Currency Non-Resident Bank (FCNR-B) deposit scheme allows non-resident Indians to park foreign currency with Indian banks for fixed tenors. The RBI revised the scheme in June 2025 by absorbing banks' hedging costs on three-to-five-year deposits and temporarily removing interest rate ceilings, making it more attractive for both banks and overseas depositors.
How much have banks raised under the revised FCNR-B scheme so far?
Banks have mobilised an estimated $3–4 billion in FCNR-B deposits since the scheme was revised, according to reports. Bankers expect this figure to grow significantly in July 2025 as NRI awareness increases, particularly among the Gulf diaspora.
What interest rates are banks offering on FCNR-B deposits?
Small finance banks are currently offering up to 7.5% on FCNR-B deposits, while large banks are offering approximately 6.5%. These rates are possible because the RBI has temporarily lifted interest rate ceilings on fresh FCNR-B deposits with maturities above three years until 30 September 2026.
Why is the RBI offering to bear banks' hedging costs?
The RBI is covering hedging costs on FCNR-B deposits with three-to-five-year maturities to reduce the financial burden on banks, encouraging them to offer more competitive rates and mobilise more stable foreign currency inflows. The goal is to strengthen India's foreign exchange reserves and support the rupee.
When do the relaxed interest rate rules expire?
The temporary relaxation of interest rate ceilings on fresh FCNR-B and NRE deposits is in place until 30 September 2026. After that date, the earlier rate caps — including the ceiling linked to the overnight alternative reference rate or swap rate plus 350 basis points for FCNR-B deposits — would revert unless extended.
