RBI Removed the FCNR(B) Rate Cap for NRIs. The Window Closes September 30

The rupee had a rough spring. It touched a record low near ₹96.6 to the dollar in May 2026, and the Reserve Bank of India responded the way it usually does when the currency gets shaky. It went looking for dollars. Not by burning through reserves this time, but by making it worth NRIs' while to park their own dollars in Indian banks instead of somewhere else.

On June 17, the RBI quietly lifted the interest rate ceiling on FCNR(B) deposits booked for three to five years. Banks that were boxed into a fixed spread above a benchmark rate can now price these deposits however they like. Here's the part that makes this worth reading today instead of filing away for later: the relaxation runs out on September 30, 2026. After that, the old ceiling comes back, unless the RBI decides to extend it.

If you're an NRI with savings sitting abroad, or you're the sibling or parent back home who just got asked "should I move money into India right now," here's what actually changed, what it's worth in real numbers, and what the calendar looks like.

 

Reserve Bank of India headquarters building in Mumbai

 

What the RBI Actually Changed on June 17

Let's be precise, because a lot of the coverage has been a bit scattered.

On June 17, 2026, the RBI's Department of Regulation issued six near identical Amendment Directions, one for each category of bank it regulates: commercial banks, small finance banks, regional rural banks, local area banks, urban co-operative banks, and rural co-operative banks. All six did the same two things.

First, they withdrew the interest rate ceiling on fresh FCNR(B) deposits with tenures of three years up to five years, including deposits renewed at maturity. Before this, that bucket was capped at the overnight Alternative Reference Rate, the benchmark that replaced LIBOR, plus 350 basis points. That cap is gone until September 30.

Second, a matching change hit NRE deposits of three years and above, which normally can't pay more than a comparable domestic rupee deposit. That restriction is lifted too, for the same window.

One tenure didn't get touched. FCNR(B) deposits of one year to under three years are still capped at ARR plus 250 basis points, right where they were before. If you're looking at a short deposit, none of this changes anything for you. And one loophole got closed on purpose: money moved from an NRO account into an NRE account doesn't qualify for the relaxed rates. The RBI clearly didn't want this turned into a tax-arbitrage trick. (Business Standard has the full announcement, and CorpLawUpdates has broken down the exact circular numbers if you want the regulatory detail.)

There's a second, related piece. Back on June 5, the RBI had already announced a subsidised dollar-rupee swap window for banks raising fresh three-to-five-year FCNR(B) deposits, open for bookings between June 8 and September 30, 2026, with the swap facility itself staying open until October 16. This lets banks hedge their dollar exposure cheaply, which is a big part of why they've actually been willing to pass higher rates on to depositors instead of quietly pocketing the savings.

 

Why the RBI Is Doing This Now

None of this happened in a vacuum. The rupee has had a genuinely difficult 2026. It slid to an all-time low around ₹96.6 to ₹96.8 per dollar in mid-to-late May, pressured by foreign investors pulling money out of Indian equities, a stronger dollar, and oil prices that spiked when tensions between the US, Israel, and Iran flared up earlier in the year. By late June it had recovered some ground, trading closer to ₹94.4, but that recovery leaned heavily on RBI intervention and a broader package of measures built to pull foreign capital back in. We covered that slide in more detail in our piece on the rupee crossing ₹95, if you want the fuller picture.

The FCNR(B) and NRE rate relaxation is one piece of that package. Around the same time, the RBI also removed capital gains and interest tax for foreign investors buying certain government securities, applied retroactively from April 1, 2026, and widened the list of securities they're allowed to invest in. The logic across all of it is the same: make it more attractive for foreign money, NRI money included, to sit in India rather than leave.

This also isn't the first time the RBI has reached for this exact tool. In September 2013, during what's remembered as the taper tantrum, the rupee had collapsed to what was then an all-time low, and the newly appointed governor, Raghuram Rajan, opened a similar FCNR(B) swap window within days of taking office. Banks ended up raising close to $26 billion through that scheme, more than double what the RBI initially expected, and it's widely credited as one of the reasons the rupee stabilised as fast as it did. Outlook Business has a good retrospective on how that 2013 scheme worked and how closely this year's version follows the same playbook, just at a smaller scale so far.

It does seem to be working, at least on the inflow side. RBI data cited by Bloomberg showed these NRI deposit measures had already pulled in $17.4 billion within about a month of taking effect. Some domestic research desks have gone further. SBI Research has projected the FCNR(B) push alone could eventually bring in ₹5 to 6 lakh crore, according to Business Today's coverage. Whether that fully materialises is a separate question, but the direction of travel is clear enough.

 

What Is an FCNR(B) Deposit, Exactly

If you've never opened one, here's the short version.

An FCNR(B) account (the "B" stands for Banks) is a fixed deposit that NRIs can open in India while keeping their money in a foreign currency the entire time. You're not converting your dollars, pounds, or euros into rupees and hoping the exchange rate is kind to you later. The deposit sits in whatever currency you funded it with, for a term of one to five years, and it comes back to you in that same currency at maturity, principal and interest both.

Most Indian banks let you open an FCNR(B) deposit in USD, GBP, EUR, JPY, CAD, AUD, and a handful of other convertible currencies. You'll need NRI status, a valid passport, and usually an existing NRE or NRO account with the bank, though some banks will open all three together with the right KYC documents. It only comes as a term deposit. There's no savings or current account version, so it isn't something you draw on day to day. It's parked money.

The appeal is straightforward: zero currency risk for the life of the deposit, interest that's exempt from Indian tax, and full repatriability, meaning you can send both the principal and interest back out of India whenever the deposit matures, with no cap on the amount.

 

FCNR(B) vs NRE vs NRO: Where This Fits

NRIs usually end up choosing between three types of accounts, and it's easy to mix them up. Here's the short version.

	NRE	NRO	FCNR(B)
Currency held	Indian rupees	Indian rupees	Foreign currency
Where the money comes from	Foreign income only	Income earned in India (rent, dividends, pension)	Foreign income only
Interest taxed in India	No	Yes, 30% TDS plus surcharge and cess	No
Repatriation	Fully repatriable	Capped at USD 1 million a year, with Form 15CA/15CB	Fully repatriable
Account types available	Savings, current, fixed deposit	Savings, current, fixed deposit	Fixed deposit only
Currency risk	Yes, rupee-denominated	Yes, rupee-denominated	None, stays in foreign currency
Best suited for	Parking foreign earnings, tax-free access	Managing India-sourced income like rent	Parking foreign currency without conversion risk

 

If your money is already earned abroad and you don't want to gamble on where the rupee goes over the next few years, FCNR(B) is built for exactly that. NRE works well too, but it converts your money into rupees on day one, so if the rupee strengthens later, you've already locked in today's weaker rate. NRO is a different animal. It's for money you're earning inside India, like rent from a flat you still own back home, and it's taxable.

 

What the Rate Change Is Actually Worth

Numbers help here. Before June 17, three-to-five-year FCNR(B) deposits were boxed into whatever the ARR plus 350 basis points formula worked out to, which left banks little room to compete with each other on price. With the ceiling gone, some have moved well past where that formula would have capped them. AU Small Finance Bank, for one, has been offering 7.10% on three-to-four-year USD FCNR(B) deposits, a rate that simply wasn't available under the old rules.

That's not a small gap once you let it compound. Take a $50,000 deposit at 7.10% for four years, assuming simple annual compounding for illustration. That works out to roughly $15,785 in interest by maturity, on top of your original $50,000, and none of it taxed in India.

 

How ICICI, HDFC, SBI, and Others Compare

Banks haven't all moved at the same speed. As of early-to-mid June 2026, IDFC First Bank and IndusInd Bank were among the most aggressive, advertising up to 6.75% on five-year USD FCNR(B) deposits. ICICI Bank, HDFC Bank, Kotak Mahindra Bank, and Bank of Baroda followed close behind at around 6.00% on the same tenure, according to a bank-by-bank comparison from Remitly. State Bank of India, being the largest and more conservative of the lot, has generally priced its NRI deposits a notch below the smaller private banks, so it's worth pulling SBI's own current rate sheet directly rather than assuming it matches the numbers above.

On the NRE side, which is rupee-denominated but got the same rate-cap relaxation, a comparison across SBI, HDFC, ICICI, and Kotak found Kotak leading on shorter tenures at 7.25% for one-to-two years, with HDFC strongest in the fifteen-month-to-three-year bracket at around 7.15%. Axis Bank also revised its NRI deposit pricing in the same window, though it's worth checking its rate page directly since its published numbers move often.

None of these figures will hold still. Every bank on this list revises its FCNR(B) and NRE rates periodically, sometimes more than once a month right now, so treat the numbers above as a starting point for comparison shopping rather than something you can lock in sight unseen. Smaller private and foreign banks (IDFC First, IndusInd, RBL, Yes Bank) have generally been quicker to pass on higher rates than the largest public sector banks, so it's worth checking at least three or four before you book.

Rates differ from bank to bank and change often, so treat any specific number as a snapshot rather than a promise you can bank on months from now. The point that matters structurally is this: for the first time in a while, banks are actually competing on FCNR(B) pricing instead of all bunching up against the same RBI ceiling.

 

The September 30 Deadline: What Happens After

This is the part that creates real urgency, so it's worth being precise.

The relaxation applies to deposits booked, or renewed, between June 17 and September 30, 2026. If you open a three-to-five-year FCNR(B) deposit inside that window, you lock in whatever rate the bank offers for the full tenure, even though the window itself closes in September. The deposit doesn't get downgraded later. You keep the rate you locked in, for the full three, four, or five years.

What happens on October 1 is less certain. The official position is that the earlier framework, the ARR plus 350 basis points ceiling, comes back into force unless the RBI extends the relaxation. Nobody outside the RBI knows for sure whether that will happen. Given that the rupee is still trading well off its pre-2026 levels and few analysts expect a sharp recovery any time soon, there's a reasonable case for an extension. But a reasonable case isn't the same as a certainty, and treating it as guaranteed would be a mistake.

If you're on the fence, the safer assumption is that this window is what you get. Deposits booked after September 30 would presumably revert to the old capped rates unless the RBI says otherwise.

 

Is FCNR(B) Interest Really Tax-Free

Yes, and this is one of the rare places in Indian tax law where the answer is genuinely simple. Interest earned on an FCNR(B) deposit is exempt from income tax in India. No TDS, no slab-based calculation, nothing to claim back later. NRE deposits get the same treatment. NRO is the odd one out. Interest on an NRO account is taxed at 30% plus surcharge and cess, deducted at source before you ever see it.

The tax-free status only covers India, though. Most countries tax their residents on worldwide income, which means if you're a tax resident of the US, UK, Canada, Australia, or most Gulf-adjacent countries, your home country may still want its share of that FCNR(B) interest, even though India never touched it. The rules vary a lot by country and by whether India has a Double Taxation Avoidance Agreement with yours, so this is genuinely worth a short conversation with a tax advisor where you live, rather than assuming the whole thing is tax-free everywhere just because it is in India.

FCNR(B) deposits also carry standard DICGC deposit insurance up to ₹5 lakh per depositor per bank, the same insurance that covers regular Indian bank deposits. If you're depositing a large sum, spreading it across more than one bank is worth considering.

 

How NRIs Can Actually Open One Before the Deadline

The mechanics are less complicated than they sound.

You'll need to qualify as an NRI (broadly, someone who's lived outside India for more than 182 days in the preceding financial year), plus a valid passport, proof of your overseas address, and your PAN card or Form 60. Most banks want an existing NRE or NRO account before you open an FCNR(B) deposit, though several now let you open all three together as part of a single NRI banking application, often fully online with video KYC.

Once the account is open, you fund it with a direct transfer from your overseas bank account, typically a SWIFT wire. This is a straightforward inward remittance, regulated under FEMA like any transfer into India, but it doesn't run through the Liberalised Remittance Scheme or attract the TCS rules that apply to money leaving India. Those are a different set of rules entirely, ones we've written about separately if you're curious how outward remittances and TCS work under the current Budget 2026 rules, or how RBI purpose codes decide how a remittance gets classified.

One note if you're the resident family member reading this on someone else's behalf rather than the NRI yourself: the FCNR(B) deposit has to be opened and funded by the NRI, directly from their own overseas account. It isn't something you can set up for them from India. Where you can actually help is the other side of the relationship, when money moves from India out to them, for a visit, for fees, for anything else that falls under LRS. That's the piece an RBI-authorised dealer like Matrix Forex handles: currency exchange, forex cards, and outward transfers at live interbank rates.

Whichever side of this you're on, compare rates across at least three or four banks before committing to an FCNR(B) deposit. The RBI removed the ceiling, but it didn't mandate a minimum, and the spread between banks right now is wide enough that shopping around genuinely pays off.

 

Bottom Line

The RBI has made FCNR(B) deposits meaningfully more attractive for the first time in years, and it's done it on a clock. Three-to-five-year deposits booked between June 17 and September 30, 2026 can carry rates well above what was possible just a few months ago, tax-free in India, fully repatriable, with zero currency risk for the life of the deposit. Whether that window gets extended past September is genuinely unknown. If this fits into your financial plans as an NRI, the next several weeks are when it actually matters.

 

Frequently Asked Questions

What is an FCNR(B) deposit?

It's a fixed deposit that NRIs can open in India in a foreign currency such as USD, GBP, or EUR, for a term of one to five years. The money stays in that currency for the full tenure, so there's no exposure to rupee fluctuations, and both principal and interest are fully repatriable.

 

Is FCNR(B) interest taxable in India?

No. Interest on FCNR(B) deposits is exempt from income tax in India. Depositors may still owe tax in their country of residence depending on local rules and any Double Taxation Avoidance Agreement with India.

 

What changed with the RBI's June 2026 FCNR(B) rate cap removal?

The RBI temporarily withdrew the interest rate ceiling on FCNR(B) deposits with three-to-five-year tenures and on NRE deposits of three years and above, letting banks offer higher rates than usual. The relaxation runs from June 17, 2026 to September 30, 2026.

 

Do I need an existing NRE or NRO account to open an FCNR(B) deposit?

Most banks prefer it, but many now let NRIs open NRE, NRO, and FCNR(B) accounts together as part of one online banking application.

 

What's the difference between an NRE and an NRO account?

An NRE account holds foreign income converted into rupees, and its interest is tax-free in India with full repatriation. An NRO account holds income earned inside India, like rent or dividends, and its interest is taxed at 30% plus surcharge and cess, with repatriation capped at USD 1 million a year.

 

What happens to FCNR(B) rates after September 30, 2026?

The relaxation is scheduled to end, and the earlier rate ceiling is expected to return unless the RBI extends the window. Deposits booked before the deadline keep their locked-in rate for the full term regardless of what happens afterward.

NRI reviewing FCNR deposit rates alongside foreign currency notes

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