Indian banks are offering more competitive interest rates on Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. This surge in returns comes after the government announced it would bear the hedging cost on these foreign currency deposits until September 30, 2026, a move designed to boost foreign currency inflows.
What are FCNR(B) Deposits?
FCNR(B) accounts are fixed deposits held by NRIs, PIOs, and OCIs in designated foreign currencies, rather than Indian rupees. This allows eligible depositors to park their overseas earnings in India while earning interest, without the need to convert funds into rupees.
A key advantage of FCNR(B) deposits is that both the principal and interest are fully repatriable under the Foreign Exchange Management Act (FEMA), 1999. Depositors receive their maturity proceeds in the same foreign currency in which the deposit was made, protecting them from fluctuations in the Indian rupee. Additionally, interest earned on FCNR(B) deposits is exempt from income tax in India, provided specific eligibility conditions are met.
Attractive Returns Across Major Currencies
Following the government's announcement, several leading banks have revised their FCNR(B) deposit rates upwards across various currencies, including the US dollar (USD), British pound (GBP), euro (EUR), Canadian dollar (CAD), and Australian dollar (AUD). While rates vary by bank and currency, some lenders are now offering USD rates as high as 6.75%.
For instance, banks like IndusInd Bank and Yes Bank are noted for offering highly competitive USD rates, with other institutions such as SBI, HDFC Bank, and Federal Bank also providing attractive returns across different foreign currencies. Depositors are advised to compare rates across banks to find the most suitable option for their investment goals.
Who Should Consider FCNR(B) Deposits?
FCNR(B) deposits are particularly suitable for NRIs, PIOs, and OCIs who wish to maintain their savings in foreign currency while benefiting from fixed returns in India. These deposits are especially beneficial for those who anticipate needing to use their savings in the same foreign currency after maturity, as they eliminate exchange rate risk related to rupee depreciation.
Before investing, potential depositors should not only compare interest rates offered by different banks but also understand the applicable tax rules in their country of residence, as tax treatment may differ outside India.