RBI eases NRI deposit rate caps to boost forex reserves and rupee
Synopsis
The RBI has quietly dismantled one of the key guardrails on what banks can offer NRI depositors — and it has done so with a deadline. By lifting rate caps on FCNR(B) and NRE deposits until 30 September, the central bank is betting that higher yields will pull in enough overseas capital to stabilise the rupee and rebuild forex buffers battered by oil prices and FII outflows.
Key Takeaways
The RBI has temporarily removed interest rate ceilings on fresh FCNR(B) deposits (maturities over 3 years to 5 years ) and NRE deposits ( 3 years and above ), effective until 30 September .
Previously, NRE deposit rates could not exceed comparable domestic rupee term deposit rates; FCNR(B) rates were capped at the swap rate plus 350 basis points .
Transfers from NRO accounts to NRE accounts are not eligible for the exemption.
Some banks are already offering between 6% and 7.10% on eligible FCNR(B) tenors following the RBI's special swap facility.
The move is part of a broader push to attract foreign capital amid rupee weakness, high global oil prices, and FII outflows from Indian equity markets.
The Reserve Bank of India (RBI) on Wednesday, 17 June temporarily lifted interest rate ceilings on select non-resident deposits, giving banks the latitude to offer higher returns on fresh FCNR(B) and NRE deposits. The measure, effective until 30 September, is aimed at pulling in more overseas capital to shore up the country's foreign exchange reserves and arrest pressure on the rupee.
What the RBI Has Changed
Under the revised framework, the RBI has removed the interest rate ceiling on fresh Foreign Currency Non-Resident (Bank) — FCNR(B) deposits with maturities of more than three years and up to five years. Simultaneously, restrictions on rates offered on fresh Non-Resident External (NRE) deposits of three years and above have also been withdrawn.
Previously, banks had to ensure that interest rates on NRE deposits did not exceed those offered on comparable domestic rupee term deposits. FCNR(B) deposits in the three-to-five-year bracket were subject to a ceiling tied to the applicable overnight alternative reference rate or swap rate plus 350 basis points. Both restrictions are now suspended for the stipulated window.
Notably, the RBI has clarified that transfers from Non-Resident Ordinary (NRO) accounts to NRE accounts will not qualify for the exemption.
Why the RBI Acted Now
The move comes against a backdrop of mounting pressure on India's external finances. Soaring global oil prices and sustained outflows by foreign funds from Indian equity markets have collectively drawn down the country's foreign exchange reserves and weakened the rupee. The central bank has responded with a coordinated set of measures aimed at broadening the inflow of foreign currency.
This is the latest in a sequence of steps. Earlier this month, the RBI permitted all foreign individual investors — not just non-resident Indians (NRIs) and Overseas Citizens of India (OCIs) — to directly purchase shares in listed Indian companies, expanding the capital market access window significantly.
Special Swap Facility and Bank Rate Hikes
The central bank also introduced a special swap facility designed to absorb a large portion of the hedging costs that banks typically bear on foreign-currency deposits. Several private and public sector banks have already passed on this benefit to depositors, with some lenders reportedly offering between 6% and 7.10% on eligible FCNR(B) tenors — rates that are considerably more competitive than what was available before the easing cycle began.
What This Means for NRIs and the Rupee
For non-resident Indians and overseas savers, the window represents a meaningful opportunity to lock in higher returns on foreign-currency and rupee-denominated deposits at Indian banks. For the broader economy, the success of the measure will hinge on how aggressively banks market these products and whether the rate differential is compelling enough to attract sustained inflows. The RBI's window closes on 30 September, after which standard rate-cap rules are expected to be reinstated unless extended.
Point of View
Not just policy design. India has used the FCNR(B) route before, most notably in 2013 when the Raghuram Rajan-led RBI mobilised over $34 billion to rescue a collapsing rupee. The current window is narrower and the macro context different, but the underlying logic is identical: use yield as a magnet when the current account is under stress. The risk is that a three-month window may not be long enough to shift the deposit behaviour of overseas savers, many of whom require longer planning horizons. If the rupee stabilises before September, the RBI will claim success; if it does not, the pressure to extend or escalate will mount quickly.
NationPress
12 Aug 2026
Frequently Asked Questions
What has the RBI changed about NRI deposit interest rates?
The RBI has temporarily removed the interest rate ceiling on fresh FCNR(B) deposits with maturities of more than three years and up to five years, and on fresh NRE deposits of three years and above. The relaxation is in effect until 30 September, after which standard rules are expected to apply again.
Why has the RBI eased NRI deposit rate restrictions?
The central bank is trying to attract more foreign-currency and rupee inflows from overseas investors to rebuild India's foreign exchange reserves and stabilise the rupee, which has come under pressure from high global oil prices and sustained FII outflows from Indian equity markets.
Who benefits from the RBI's NRI deposit rate relaxation?
Non-resident Indians and other overseas savers holding or opening FCNR(B) or NRE deposits at Indian banks stand to benefit, as banks can now offer more competitive interest rates. Some lenders are already offering between 6% and 7.10% on eligible FCNR(B) tenors.
Are NRO-to-NRE account transfers covered under the new rules?
No. The RBI has explicitly stated that transfers from Non-Resident Ordinary (NRO) accounts to NRE accounts will not qualify for the interest rate exemption.
What other steps has the RBI taken to support the rupee and forex reserves?
Alongside the deposit rate relaxation, the RBI has introduced a special swap facility to absorb banks' hedging costs on foreign-currency deposits, and has also expanded direct equity investment access to all foreign individual investors — beyond NRIs and OCIs — in listed Indian companies.
