India's two largest private sector lenders, HDFC Bank and ICICI Bank, have announced a hike in interest rates on select Foreign Currency Non-Resident (Bank), or FCNR(B), fixed deposits to 6.25%. This development offers Non-Resident Indians (NRIs) a more attractive avenue to park their foreign earnings in India, providing higher tax-efficient returns.
Why FCNR(B) Rates Are Rising
The increase in FCNR(B) deposit rates comes on the heels of a government-backed initiative aimed at reducing hedging costs for banks. The Reserve Bank of India (RBI) had previously announced in June that the government would absorb hedging costs for FCNR(B) deposits with maturities between three and five years until September 30, 2026. This measure effectively lowers funding costs for banks, enabling them to pass on the benefit to investors through higher interest rates, typically by 25 basis points on eligible deposits. This strategy also encourages greater foreign currency inflows into the Indian banking system.
HDFC Bank's New FCNR(B) Offers
HDFC Bank is now providing a 6.25% interest rate on FCNR(B) deposits for specific tenures: three years to less than four years, four years to less than five years, and five years. For deposits booked between June 10 and September 30, 2026, with tenures of three to five years, a one-year lock-in period will apply. Investors opening deposits via net banking should note that the applicable interest and foreign exchange rates will be those prevailing on the date the deposit is processed, not the submission date, with processing typically taking two working days.
ICICI Bank Matches Rates with Specific Terms
ICICI Bank has also aligned its FCNR(B) deposit rates, offering 6.25% on deposits of ₹4 lakh and above for tenures ranging from more than 36 months to less than 48 months, more than 48 months to less than 60 months, and exactly 60 months. The bank has outlined its premature withdrawal rules: deposits with original tenures of one to three years will not earn interest if closed before 12 months. After one year, interest will be paid at the original booking rate without penalty. For deposits with original tenures of three to five years, a 12-month lock-in period is enforced, with a 1% penalty for withdrawals after the lock-in, calculated on the applicable rate at booking.
Understanding FCNR(B) Deposits for NRIs
FCNR(B) deposits allow NRIs to maintain fixed deposits in designated foreign currencies such as the US dollar, pound sterling, and euro. A key advantage is that both the principal and interest remain denominated in the foreign currency, shielding investors from fluctuations in the Indian rupee. This protection against exchange rate risk, combined with tax-free interest, makes these deposits particularly appealing for NRIs seeking stable returns on their foreign earnings.
Vishal Goraddia, Fund Manager at Aikyam India Discovery Fund, advises viewing FCNR(B) deposits as a component of a fixed-income portfolio rather than a growth investment. He highlights their competitive, tax-efficient, dollar-denominated returns without direct rupee depreciation exposure. However, he cautions against shifting funds from equities solely for short-term FCNR(B) returns, which could compromise long-term wealth creation.
The RBI's temporary swap support has already significantly boosted foreign currency mobilization across the banking sector. Several other major banks, including State Bank of India, Axis Bank, Kotak Mahindra Bank, Bank of Baroda, Punjab National Bank, and Canara Bank, are currently offering indicative FCNR(B) rates around 6.00% for similar 3-5 year tenures, though rates may vary by currency and booking details.