Banks kick-off rate hikes on FCNR (B) deposits

SBI economists expect around $40-45 billion to come in through the FCNR (B) deposits route.

Banks have kicked off rate hikes on FCNR (B) US dollar deposits in the three-five years tenor in earnest, with interest rates being increased to 6-7 per cent thereabouts, from the earlier 3 per cent odd levels.The sharp rise in interest rates on foreign currency non-resident (bank) deposits denominated in US dollars follows RBI’s measures to bolster dollar inflows, including by bearing the full hedging cost for raising fresh 3-5-year FCNR (B) deposits.On a FCNR (B) deposit of up to $1 million and above $1 million in the three years and above but less than four years tenor, State Bank of India (SBI) is now offering interest rate of 5.25 per cent and 5.50 per cent respectively. Earlier, interest rate on these deposits, irrespective of the amount, was at 3.35 per cent.On a FCNR (B) deposit of up to $1 million and above $1 million in the four years and above but less than five years tenor, India’s largest bank is quoting interest rate of 5.50 per cent and 5.75 per cent respectively. The earlier interest rate was 2.95 per cent.On a FCNR (B) deposit of up to $1 million and above $1 million of five years tenor, SBI is quoting interest rate of 5.75 per cent and 6 per cent respectively. The earlier interest rate was 3.05 per cent.Win-win“The RBI’s move to attract dollars via FCNR (B) deposits is a win-win for all stakeholders – depositors, banks and RBI. Depositors will get better returns, banks’ deposits will be augmented at a time when credit growth is healthy and the central bank could achieve its objective of reducing volatility in the rupee,” said K Arvind, Head – Treasury, Tamilnad Mercantile Bank (TMB).Karur Vysya Bank (KVB) has increased its FCNR(B) US dollar deposit rates for maturities of three years to five years to 7 per cent per annum from the earlier rate of 2.63 per cent with effect from June 10, 2026. TMB too has upped its FCNR (B) US dollar deposit rates for maturities of three years to five years to 7 per cent from the earlier range of 3.50-3.90 per cent.AU Small Finance Bank’s peak FCNR(B) US dollar deposit rate is now at 7.10 per cent against 5.15 per cent earlier.SBI economists expect around $40-45 billion to come in through the FCNR (B) deposits route. RBI will bear full hedging cost for banks raising fresh three-five-year FCNR (B) deposits till 30 September 2026. The fresh deposits raised are exempt from statutory reserve requirements.V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank, said, “Taken together, the swap concession and regulatory exemptions significantly lower the effective rupee cost of funds, enabling banks to offer more competitive FCNR(B) rates while remaining cost-effective. This is likely to intensify competition for NRI deposits, particularly in the 3-5 year maturity segment.”Published on June 10, 2026