RBI lifts rate cap on FCNR(B) and NRE deposits — window closes 30 September

The Reserve Bank of India has temporarily removed the interest-rate ceiling on fresh Foreign Currency Non-Resident [FCNR(B)] and Non-Resident External (NRE) deposits in the 3-to-5-year maturity bucket, via amendment directions dated 17 June 2026. The relaxation is in force only until 30 September 2026, and several banks have already repriced sharply higher.

What changed

• Earlier, banks could not offer FCNR(B) rates above the relevant currency’s overnight alternative reference rate (or swap rate) plus 350 basis points for the 3-to-5-year bucket. That ceiling is now suspended for fresh deposits booked in this window.
• The ceiling for the shorter 1-to-3-year FCNR(B) bucket is unchanged at reference rate plus 250 basis points.
• A similar cap relaxation applies to NRE term deposits, giving banks room to compete harder for NRI money.
• The relief automatically lapses on 30 September 2026 unless RBI extends or makes it permanent — rates would then revert to the pre-June ceiling from 1 October 2026.

Why RBI did this

The move is aimed at drawing more foreign-currency inflows into the banking system at a time of currency and external-account pressure, giving banks an incentive to attract NRI deposits ahead of the festive/import-heavy second half of the fiscal year.

What NRIs are seeing

Reports indicate around 30 banks have already revised FCNR(B) rates upward — from roughly 4% before the change to as high as 7.5% in the 3-to-5-year bucket for select currencies, subject to each bank’s own currency-wise card rates and a minimum lock-in. Actual rates vary by currency (USD, GBP, EUR, AUD, CAD, etc.) and by bank, so check your bank’s current FCNR(B)/NRE card rate before booking.

What to check before locking in

1. Confirm the tenor: only the 3-to-5-year bucket benefits from the relaxation — shorter deposits are priced under the old ceiling.
2. Compare across banks: the relaxation is optional for banks to use, so quoted rates differ widely — shop around rather than booking at your existing bank by default.
3. Currency risk stays with you: FCNR(B) principal and interest are held in foreign currency, so returns in rupee terms still depend on the exchange rate at maturity/repatriation. NRE deposits, by contrast, are rupee-denominated and freely repatriable.
4. Act before the window shuts: the higher ceiling applies only to deposits booked by 30 September 2026 — funds parked after that date fall back under the standard cap unless RBI extends the relief.

Compare current bank fixed-deposit cards on Bank Rates and estimate maturity value with the FD Calculator before booking.

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Sources: Business Standard — RBI lifts cap on FCNR(B), NRE deposit rates, CorpLawUpdates — RBI withdraws FCNR(B)/NRE deposit interest rate ceiling, June 2026, Outlook Money — Bank FCNR(B) rates after RBI ceiling withdrawal. Verify current card rates with your bank before booking, and check rbi.org.in for the official direction.