Indians living abroad (NRIs) may soon get a chance to get higher interest than before on their dollar deposits in Indian banks. Taking the second major step within just 10 days, the Reserve Bank of India (RBI) has given permission to banks to offer higher interest rates on NRI deposits.
In the first phase, RBI had given relief to banks from the risk related to the exchange rate of dollar and rupee. Now the central bank has also removed the upper limit of interest rate on FCNR (B) deposits, due to which banks will be able to offer more interest as per their need.
Why is this decision so important?
According to Sneha Pandey, Fixed Income Fund Manager, Quantum AMC, this is not just a decision to give relaxation in deposit rates, but a strategic initiative to strengthen the rupee and increase foreign exchange reserves. With this, Indian banks will be able to raise more dollars from NRI investors.
What changed in FCNR(B) deposits?
NRIs can deposit their foreign currency in FCNR(B) i.e. Foreign Currency Non-Resident (Bank) account. Earlier the interest rate on FCNR(B) deposits of 3 to 5 years could not exceed a fixed limit.
Now RBI has temporarily removed this limit from 17 June 2026 to 30 September 2026. This means that banks can now offer higher interest rates as per their need and market conditions.
Can interest rates go above 7% now?
Experts believe that some banks can offer more than 7% interest on deposits in specific currencies and tenures. However, NRI investors do not just look for high interest, but also give importance to the reliability, accessibility and security of the bank.
Punjab National Bank (PNB) is among the first banks to take advantage of this change. The bank has increased the interest rate on FCNR(B) deposits to 6.5% and in some cases up to 6.6%.
Which banks will benefit the most?
According to experts, big banks like State Bank of India (SBI), HDFC Bank and ICICI Bank can benefit the most from this decision. They have a strong global network and large NRI customer base, which will enable them to attract more foreign currency deposits.
NRE accounts also got relief
RBI has also relaxed the rules for NRE (Non-Resident External) deposit accounts. Earlier the interest rate on NRE deposits could not be higher than the same tenure FD in domestic rupee. Now this limit on new NRE deposits of 3 years or more has also been removed from 17 June 2026 to 30 September 2026.
It is worth noting that this exemption will be applicable only on NRE accounts and not on the amount transferred from NRO account to NRE account. Experts believe that this move of RBI will increase foreign currency deposits in Indian banks, will support the rupee and NRI investors will get an opportunity to earn better returns.
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