Several private banks, including HDFC Bank, Yes Bank, and AU Small Finance Bank, have increased interest rates on Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits following the Reserve Bank of India’s (RBI) latest measures aimed at attracting overseas capital and supporting the rupee.

Key Highlights

• Private banks raised FCNR(B) deposit rates sharply after RBI introduced concessional forex swap incentives.
• Higher NRI deposit rates aim to attract dollar inflows and support rupee stability.

The move comes after the RBI announced a special concessional forex swap facility for banks raising fresh FCNR(B) deposits with maturities of three to five years. Under the scheme, the central bank will absorb the full hedging cost on these deposits until September 30, 2026, making it more attractive for banks to mobilise foreign currency funds from non-resident Indians (NRIs).

Banks Offer Higher Returns on FCNR(B) Deposits

Following the RBI’s announcement, HDFC Bank has reportedly raised its FCNR(B) deposit rate for three-to-five-year tenures to 6%, up from around 3.65% earlier. Meanwhile, YES Bank and AU Small Finance Bank have increased rates to as high as 7.1% on select fresh FCNR(B) deposits, among the highest in the market currently.

Banking industry experts believe the revised rates could help attract substantial dollar inflows at a time when the rupee remains under pressure from elevated crude oil prices, geopolitical uncertainties, and foreign capital outflows. The Indian currency has weakened nearly 6% against the US dollar so far in 2026.

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RBI Targets Stronger Dollar Inflows

The RBI's latest initiative mirrors a similar FCNR(B) mobilisation programme launched in 2013, which helped India attract significant foreign currency deposits during a period of rupee weakness. Analysts estimate that the current package of FCNR(B) incentives and external commercial borrowing (ECB) measures could generate between $35 billion and $60 billion in fresh inflows over the coming months.

According to market participants, the RBI’s decision to absorb hedging costs effectively lowers banks’ funding expenses, enabling them to pass on higher returns to depositors while strengthening the country’s foreign exchange reserves and improving liquidity conditions.

Focus on NRIs and Rupee Stability

Banks are expected to actively target NRIs and persons of Indian origin across key overseas markets, including the United States, Canada, the United Kingdom, and the Middle East. The enhanced deposit rates are designed to make FCNR(B) accounts more competitive compared to global fixed-income investment options.

Industry observers believe the RBI’s proactive measures underscore its commitment to stabilising the rupee, strengthening foreign exchange reserves, and ensuring adequate liquidity within the banking system amid a challenging global economic environment.