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RBI targets NRI deposits with revised FCNR-B interest rates
The initiative is expected to provide NRIs with an attractive opportunity to earn higher returns on their savings in India, while also helping the RBI replenish its forex reserves, which have seen a significant decline in recent weeks.
Reserve Bank of India. / RBI
In a bid to attract higher deposits from non-resident Indians (NRIs), the Reserve Bank of India (RBI) has raised the interest rate ceilings on Foreign Currency Non-Resident Bank (FCNR-B) deposits.
The move is part of broader efforts to bolster foreign capital inflows amid heightened volatility in the Indian currency.
Announced during the fifth bi-monthly monetary policy review for the fiscal year, RBI Governor Shaktikanta Das outlined the revised limits, which are effective from Dec. 6.
Banks can now offer interest rates up to 400 basis points above the Overnight Alternative Reference Rate (ARR) for FCNR-B deposits with maturities of 1 to less than 3 years—up from the earlier cap of 250 basis points. For deposits with maturities of 3 to 5 years, the ceiling has been raised to 500 basis points above ARR, compared to the previous limit of 350 basis points.
“This decision to increase the interest rate ceilings aligns with the need to attract higher capital inflows, especially given the pressures on the rupee,” said Governor Das during the policy announcement.
The initiative is expected to provide NRIs with an attractive opportunity to earn higher returns on their savings in India, while also helping the RBI replenish its forex reserves, which have seen a significant decline in recent weeks.
The enhanced interest rate caps will remain in effect until Mar. 31, 2025, with analysts suggesting the move could stabilize reserve levels and strengthen the rupee.
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