On June 17, 2026, the RBI temporarily removed interest rate ceilings on fresh FCNR(B) deposits with maturities of three to five years and on NRE deposits with tenors of three years and above. The relaxation, effective immediately, runs until September 30, 2026. Applicable to fresh deposits and renewed deposits, the move aims to attract durable overseas inflows from NRIs. The amendment was issued under Section 35A of the Banking Regulation Act, 1949.

India periodically uses the FCNR(B) route as a strategic lever to attract hard currency from the diaspora during periods of external sector stress or rupee depreciation pressure. FCNR(B) deposits are held in foreign currency (USD, GBP, EUR, etc.) and carry no exchange rate risk for the depositor — the bank absorbs it. NRE deposits, while rupee-denominated, are fully repatriable and their interest income is tax-free in India, making them popular with the diaspora.

The existing framework capped FCNR(B) rates for 3–5 year deposits at the Overnight Alternative Reference Rate (OARR) plus 350 bps, and 1–3 year deposits at OARR plus 250 bps. By temporarily lifting the 3–5 year cap, banks can now set rates freely, making these deposits more competitive against US fixed deposits and other global instruments that NRIs consider.

For NRE deposits, rates were tied to comparable domestic term deposit rates. The relaxation breaks this link for tenors of 3 years and above, letting banks sweeten the deal for long-term NRI money.

This is not unprecedented — in 2013, a similar FCNR(B) scheme attracted over $34 billion. SBI Research estimates the current window could mobilise ₹5.2–6.2 lakh crore. The statutory basis — Section 35A of the Banking Regulation Act — gives the RBI overriding power to issue binding directions to banks on deposit conditions. The relaxation is temporary and sunsets on September 30, 2026.