AU Small Finance Bank has announced a significant hike in interest rates for its Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident External (NRE) fixed deposits. This move positions the bank to attract more overseas deposits, aligning with recent Reserve Bank of India (RBI) measures aimed at boosting foreign currency inflows into the country.
New Rates Offer Competitive Returns
For FCNR(B) deposits, AU Small Finance Bank has raised the peak interest rate to 7.40% per annum, up from the previous 7.10%, applicable for tenures ranging from three to less than four years. Similarly, the highest rate on NRE fixed deposits has been increased to 7.60% from 7%, specifically for deposits with a tenure of 36 months and one day up to 45 months.
This revision comes after the RBI, in June 2026, introduced a special swap window, granting banks greater flexibility to offer attractive rates on FCNR(B) deposits. The initiative is designed to encourage Non-Resident Indians (NRIs) to invest their foreign earnings in India.
Understanding FCNR(B) Deposits
FCNR(B) deposits are fixed deposit accounts that allow NRIs, Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs) to park their funds in designated foreign currencies rather than Indian rupees. These accounts can be opened in major global currencies, including the US dollar (USD), British pound (GBP), Euro (EUR), Japanese yen (JPY), Australian dollar (AUD), Canadian dollar (CAD), Singapore dollar (SGD), and Swiss franc (CHF).
A key advantage of FCNR(B) deposits is their protection against exchange rate fluctuations between the deposit currency and the Indian rupee. Both the principal amount and the accrued interest are fully repatriable, subject to RBI regulations. This contrasts with NRE fixed deposits, which are denominated in Indian rupees.
Intense Competition for NRI Deposits
AU Small Finance Bank's rate hike underscores the intensifying competition among Indian banks for NRI deposits following the RBI's recent policy adjustments. Other major lenders are also adjusting their offerings:
- State Bank of India (SBI): Offers up to 6% on FCNR(B) deposits in US dollars for maturities of three to five years, with slightly higher rates for deposits exceeding USD 1 million.
- RBL Bank: Provides up to 6.35% on five-year US dollar FCNR(B) deposits, with varying rates across different currencies and tenures.
AU Small Finance Bank's new peak FCNR(B) rate of 7.40% is currently among the highest available in the Indian banking sector. Additionally, the bank has affirmed that eligible customers will continue to benefit from zero forex margin and zero bank charges on qualifying inward and outward remittances, with currency conversion offered at the bank's interbank reference rate.
RBI Measures Drive Inflows
The RBI's strategic measures appear to be successful. Data from the central bank indicates that foreign currency inflows mobilized under the special swap facility reached $20.718 billion as of July 17, 2026. This total includes $17.406 billion through FCNR(B) deposits, $1.970 billion via Overseas Foreign Currency Borrowings (OFCBs), and $1.342 billion through External Commercial Borrowings (ECBs).
The strong mobilization has led SBI Research to project FCNR(B) inflows of $65-70 billion by the scheme's end, highlighting the growing appeal of these deposits among NRIs. For non-resident Indians seeking higher returns while mitigating currency risk, FCNR(B) deposits have re-emerged as a highly attractive savings option, especially as banks continue to enhance interest rates in response to the RBI's supportive policy framework.