Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and Persons of Indian Original (POIs) may now earn more interest on their investments in Foreign Currency Non-Resident (Bank) Deposit-FCNR(B) as the Reserve Bank of India (RBI) has announced that the government would now bear the hedging cost for fresh 3 to 5 year FCNR(B) deposits until September 30, 2026. An estimate from Anand Rathi Wealth shows that how on a Rs $10,000 investment in a 5-year FCNR(B) deposit, an NRI or OCI may now earn an additional interest of $1,277. What is FCNR(B) and who can invest? FCNR(B) is a term deposit account that allows NRIs and OCIs to invest and withdraw deposits in designated foreign currencies such as USD, GBP, EUR, AUD, CAD and JPY with an authorised Indian bank. Additionally, interest earned on FCNR(B) deposits is exempt from income tax in India for eligible non-resident depositors. This is contrast to a Non-Resident External (NRE) Account where an NRI can invest and withdraw in Indian currency and the interest income is taxable in India. What was the past hedging cost related to FCNR(B)? Shweta Rajani, associate director, Anand Rathi Wealth, told ET Wealth Online that when an NRI deposits dollars in an Indian bank through an FCNR(B) account, the bank has to convert those dollars into rupees to lend them out. To protect itself from currency risk, the bank buys a hedge, Shweta explains, adding this hedge cost is roughly 3% a year, and has always eaten into the interest rate a bank offers to a depositor. What has changed in FCNR(B) deposit hedging cost for banks? In the June 2026 Monetary Policy Committee (MPC) meeting, RBI governor Sanjay Malhotra announced that the government would bear the entire hedging cost for fresh 3 to 5-year FCNR(B) deposits until September 30, 2026. It means since banks will not bear the hedging cost till September 30, they can pass on more interest to NRI depositors directly. Based on bankers' estimates, rates could go up by 1.5% to 2%, explains Shweta. How can new hedging cost benefit FCNR(B) investors and banks? The first and foremost benefit will be that FCNR depositors will get significantly higher interest rates. Adhil Shetty, CEO, Bankbazaar, told ET Wealth Online that the new rule improves the economics of raising FCNR deposits for banks and could encourage them to offer more competitive rates. “For NRIs and OCIs, the benefit may come in the form of improved deposit offerings, potentially better pricing, and greater availability of FCNR products across banks,” says Shetty. Some banks such as HDFC Bank, Central Bank of India, and AU Small Finance Bank updated their FCNR(B) interest rates today (Wednesday, June 10, 2026). As far as interest rates of their USD FNCR(B) deposits are concerned, HDFC Bank and Central Bank of India are offering a maximum of 6% rate each on their respective 3 to 5-year FCNR(B) deposits. AU Small Finance Bank is offering a 7.1% rate on FCNR(B) deposits of 3 to 4 years. How an NRI may earn $1,277 more in interest on $10,000 deposit in FCNR(B) Shweta, though her estimates, illustrates how a new depositor may earn $1,277 more in interest on a $10,000 deposit in a five-year FCNR(B) deposit. Example: Consider an NRI deposits $10,000 for 5 years. Particular Before After Principal $10,000 $10,000 Interest rate per year 4.50% 6.50% Total interest earned (USD)* 2,492 3,769 Principal returned (USD) 10,000 10,000 Total amount at maturity (USD) 12,492 13,769 Extra earned — $1,277 more *RBI rules - Interest on FCNR(B) deposits compounds every 180 days and the year is counted as 360 days. So, on a 5-year deposit, interest is added 10 times over the tenure. In calculations, you can see that how an increase of 2% interest rate by a bank in lack of a hedging cost can benefit a 5-year FCNR(B) depositor significantly. The benefit can be more if banks increase FCNR(B) interest rates to higher levels. Adhil Shetty explains some of the prominent features of FCNR deposits. Benefits of investing in FCNR(B) for NRIs and OCIs Since both the principal and interest are held in a foreign currency, depositors are insulated from currency depreciation risks. Another key benefit is that both the principal and interest are fully repatriable, making FCNR(B) deposits a convenient option for NRIs managing finances across countries. FCNR(B) deposits remain an attractive option for NRIs and OCIs seeking foreign currency exposure, capital preservation and predictable returns through the Indian banking system. Do NRIs and OCIs have investment limits for FCNR(B)? RBI regulations do not prescribe a specific upper limit on the amount that eligible NRIs and OCIs can invest in FCNR(B) deposits. However, individual banks may prescribe minimum deposit amounts and operational thresholds for FCNR(B) deposits. Depositors may also maintain multiple FCNR(B) deposits across different currencies and maturities depending on their investment requirements. Are premature withdrawals allowed in FCNR(B)? Premature withdrawal of FCNR(B) deposits is permitted, subject to RBI regulations and the terms and conditions specified by the bank. However, the interest payable depends on the period for which the deposit remained with the bank. For FCNR(B) deposits withdrawn before one year, no interest is generally payable. For deposits withdrawn after one year, interest is usually paid for the period the deposit remained with the bank, subject to the bank's premature withdrawal policy and applicable penalties. The exact penalty structure varies across banks and may depend on factors such as the residual maturity and the cost incurred by the bank in managing the deposit. What happens on the maturity of an FCNR(B) deposit? On maturity, the proceeds of an FCNR(B) deposit are credited as per the depositor's instructions registered with the bank. Depending on the mandate provided, the deposit may be renewed, transferred to another FCNR(B) deposit, credited to an NRE account, or remitted overseas. If no maturity instructions are received, banks may follow the auto renewal or default maturity instructions agreed at the time of account opening.