RBI opens special window: NRI dollar deposits could earn higher interest
New Delhi, Jun 10, 2026
Banks can mobilise fresh FCNR deposits till September 30 under RBI's new swap facility
If you are an NRI holding surplus dollars overseas, the Reserve Bank of India (RBI) has opened a facility that could make Indian dollar deposits significantly more attractive over the next few months.
Seeking to draw foreign currency, the RBI on June 8 introduced a special US dollar-rupee swap facility for fresh Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. The facility will be available for deposits mobilised until September 30, 2026, with banks able to access the RBI window until October 16.
The measure echoes a similar scheme launched in 2013, when India faced pressure on the rupee and external finances. While the economic backdrop today is different, the objective remains familiar: Encourage overseas Indians to bring foreign currency deposits into Indian banks and strengthen foreign exchange liquidity.
What has RBI announced?
Under the scheme, authorised dealer banks can mobilise fresh FCNR(B) deposits for a period of three to five years and swap the underlying foreign currency with the RBI. The central bank will undertake the swap at par, meaning banks can sell dollars to RBI and buy them back at the same exchange rate at maturity.
The RBI circular states that banks will remain free to determine deposit rates according to their internal policies and existing regulatory ceilings.
For depositors, the significance lies in what this arrangement does to banks' funding costs.
Typically, banks raising dollar deposits must hedge the currency risk associated with deploying those funds. That hedging cost can materially reduce the interest rate banks are willing to offer. By providing a dedicated swap facility, RBI effectively reduces that burden, creating room for banks to offer more competitive FCNR(B) rates.
Market participants expect the facility to lift FCNR(B) deposit rates meaningfully from prevailing levels, although individual banks have yet to announce revised offerings.
How FCNR(B) deposits work
FCNR(B) deposits are term deposits maintained in foreign currency by non-resident Indians and Overseas Citizens of India.
Unlike traditional NRE fixed deposits, FCNR(B) deposits are held in the foreign currency itself. If a depositor places US dollars, both the principal and interest are paid back in dollars at maturity.
This structure removes direct rupee depreciation risk from the investment.
The RBI circular specifies that deposits eligible under the scheme must have a minimum tenor of three years and a maximum tenor of five years. The corresponding swap tenor will match the tenor of the underlying deposit.
Important conditions investors should note
The scheme comes with several operational conditions that NRIs should understand before committing funds.
The underlying deposits will carry a mandatory lock-in period of one year. Banks may permit premature withdrawals after one year, but only according to their internal policies. Importantly, swaps undertaken by banks with RBI cannot be cancelled.
The facility applies to fresh FCNR(B) deposits mobilised between June 8 and September 30, 2026, including eligible deposits renewed on maturity.
Banks can also mobilise deposits in other freely convertible currencies, although the RBI swap itself will be conducted only in US dollars.
Another key point is that RBI is not guaranteeing any particular deposit rate. The circular explicitly says banks are free to price these deposits within existing regulatory guidelines.
As a result, investors will need to wait for individual banks to publish revised FCNR(B) rates before making comparisons with alternatives such as US Treasury securities, bank certificates of deposit or money market funds.
Why RBI is using this route
The timing of the measure reflects the importance of maintaining adequate foreign currency inflows at a time of heightened external uncertainties.
FCNR(B) deposits have historically served as a useful source of relatively stable foreign currency funding because they are typically locked in for several years. By incentivising banks to attract such deposits, RBI can potentially improve foreign exchange liquidity without resorting to more disruptive market interventions.
The 2013 FCNR(B) mobilisation programme demonstrated the effectiveness of this approach in attracting substantial overseas deposits. The latest initiative follows a similar template, although the scale of inflows will depend on the rates eventually offered by banks and global interest rate conditions.
Should NRIs consider the opportunity?
The answer depends on the final rates announced by banks and an investor’s liquidity requirements.
For NRIs holding idle dollar balances that are unlikely to be needed for at least three years, the scheme could become an attractive option if banks pass on most of the benefit arising from RBI's swap facility.
However, investors should compare the eventual FCNR(B) rates with returns available in their country of residence, assess tax implications under local laws, and consider the lock-in features before investing.
For now, the RBI has created the framework. The next step is for banks to reveal the rates they are willing to offer. Those numbers will determine whether the latest FCNR(B) window becomes a major draw for NRI savings or simply another deposit option in an increasingly competitive global interest-rate environment.
[The Business Standard]
