RBI clarifies FCNR-B deposit rules; NRI inflows may lift rupee
Synopsis
The RBI has quietly activated one of its most potent forex stabilisation tools — the FCNR-B deposit channel — with fresh operational clarifications that let banks lend against NRI deposits and access central bank swap support. With lenders already pushing rates to 7.1%, the stage is set for a potential NRI inflow surge that could take pressure off the rupee.
Key Takeaways
The RBI issued operational clarifications on FCNR-B deposits on 23 June , addressing bank queries on mobilisation and lending.
Banks can now extend loans to non-residents and issue SBLCs against FCNR-B deposits, and may mark a lien on such accounts.
The RBI will offer a buy-sell forex swap facility covering the principal of fresh FCNR-B deposits with a minimum maturity of three years .
Yes Bank , Canara Bank , South Indian Bank , and AU Small Finance Bank have raised FCNR-B rates to as high as 7.1% .
The Indian rupee closed at ₹94.73 to the dollar on 23 June ; analysts expect near-term appreciation as NRI inflows pick up.
The Reserve Bank of India (RBI) on Tuesday, 23 June issued detailed clarifications on the operational framework governing Foreign Currency Non-Resident Bank (FCNR-B) deposits, responding to queries from banks on mobilisation and related lending activities. The move is widely expected to unlock greater non-resident inflows and provide near-term support to the Indian rupee, which closed at ₹94.73 against the US dollar on the same day.
What the RBI Clarified
According to a document released by the central bank, all Indian banks — including their overseas branches — are permitted to extend loans to non-residents or issue standby letters of credit (SBLCs) in favour of overseas lenders against FCNR-B deposits mobilised by them. Banks may also extend loans directly to FCNR-B account holders and are authorised to mark a lien on such deposits, providing greater operational flexibility in raising foreign currency resources from Non-Resident Indians (NRIs).
Swap Support and Tenor Conditions
The RBI further stated that banks will be eligible to undertake foreign exchange swaps with tenors of less than three years, provided they have mobilised fresh eligible FCNR-B deposits carrying a minimum original maturity of three years under the special scheme. Under this arrangement, the central bank will offer a plain buy-sell foreign exchange swap facility to participating banks. Crucially, the swap support will cover only the principal amount of the deposits and will not extend to the interest component.
Banks Raise Deposit Rates to Attract Overseas Funds
Following the RBI's announcement of hedging support for fresh three-year and five-year FCNR-B deposits, several public and private sector lenders have moved quickly to raise deposit rates. Banks including Yes Bank, Canara Bank, South Indian Bank, and AU Small Finance Bank have hiked FCNR-B deposit rates to as high as 7.1% in a bid to attract overseas funds. The competitive rate environment signals that lenders see meaningful demand from the NRI community.
Rupee Outlook and Market Sentiment
The Indian rupee ended the 23 June session at ₹94.73 to the dollar, marginally weaker than ₹94.69 in the previous session. However, analysts expect the domestic currency to witness some appreciation in the near term as fresh FCNR-B inflows begin entering the banking system. Market participants believe the combination of higher deposit rates, RBI swap support, and the latest operational clarifications could collectively encourage a meaningful uptick in non-resident inflows over the coming weeks.
Why This Matters
FCNR-B deposits have historically served as a significant lever for shoring up India's foreign exchange reserves during periods of currency stress. This is not the first time the RBI has activated this channel — a large-scale FCNR-B mobilisation drive in 2013 helped stabilise the rupee during a severe episode of capital outflow pressure. The current clarifications, coming amid a broadly weak rupee environment, suggest the central bank is once again looking to this route as part of a multi-pronged currency management strategy.
Point of View
Not a panic measure — but its timing against a rupee trading near ₹94.73 is telling. The central bank is clearly looking to build a non-resident inflow buffer before currency pressure deepens. The 2013 FCNR-B playbook worked precisely because rates were attractive and the hedge was credible; both conditions appear to be in place now. The real question is whether NRI appetite is strong enough at 7.1% when global alternatives — particularly US dollar instruments — remain competitive. If inflows disappoint, the RBI will need to lean harder on its direct intervention toolkit.
NationPress
23 Jun 2026
Frequently Asked Questions
What are FCNR-B deposits and why has the RBI issued clarifications on them?
FCNR-B (Foreign Currency Non-Resident Bank) deposits are foreign currency accounts held by NRIs with Indian banks. The RBI issued clarifications on 23 June to resolve bank queries on lending against these deposits and to outline the terms of its swap support, aiming to boost NRI inflows and support the rupee.
What lending activities are now permitted against FCNR-B deposits?
Banks can extend loans to non-residents, issue standby letters of credit (SBLCs) in favour of overseas lenders, and lend directly to FCNR-B account holders. They are also allowed to mark a lien on such deposits.
How does the RBI's forex swap support work for FCNR-B deposits?
The RBI will provide a buy-sell foreign exchange swap to banks that mobilise fresh FCNR-B deposits with a minimum original maturity of three years. The swap covers only the principal amount and excludes the interest component. Banks must have mobilised eligible deposits to access swaps with tenors below three years.
Which banks have raised FCNR-B deposit rates, and by how much?
Yes Bank, Canara Bank, South Indian Bank, and AU Small Finance Bank are among the lenders that have raised FCNR-B deposit rates to as high as 7.1% following the RBI's announcement of hedging support for three-year and five-year deposits.
What is the expected impact on the Indian rupee?
The rupee closed at ₹94.73 against the US dollar on 23 June. Analysts expect some near-term appreciation as fresh FCNR-B inflows enter the banking system, with higher deposit rates and RBI swap support together expected to incentivise NRI remittances through this channel.
