{"id":108668,"date":"2026-06-18T11:24:30","date_gmt":"2026-06-18T05:54:30","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=108668"},"modified":"2026-06-18T11:24:30","modified_gmt":"2026-06-18T05:54:30","slug":"rbis-attracts-nri-deposits","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/rbis-attracts-nri-deposits\/","title":{"rendered":"RBI\u2019s Latest Measures to Attract NRI Deposits &#8211; Explained"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><strong>NRI Deposits Latest News<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Reserve Bank of India (RBI) has temporarily withdrawn interest rate ceilings on certain <\/span><b>FCNR(B)<\/b><span style=\"font-weight: 400;\"> and <\/span><b>NRE deposits<\/b><span style=\"font-weight: 400;\">, while also introducing a special swap facility to encourage higher foreign currency inflows from Non-Resident Indians (NRIs).<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>FCNR(B), NRE and NRO Accounts<\/strong><\/h2>\n<ul>\n<li><span style=\"font-weight: 400;\">India offers specialised banking accounts for Non-Resident Indians (NRIs) to facilitate savings, investments, and remittances.<\/span><\/li>\n<li aria-level=\"1\"><b>Foreign Currency Non-Resident (Bank) [FCNR(B)] Account<\/b><\/li>\n<li><span style=\"font-weight: 400;\">An FCNR(B) account is a <\/span><b>fixed deposit account maintained in foreign currency<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong>Key features include:<\/strong>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Deposits are maintained in designated foreign currencies such as the US Dollar, Pound Sterling, Euro, Australian Dollar, Canadian Dollar, and Singapore Dollar.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Depositors are protected from exchange rate fluctuations because both principal and interest are repaid in the same foreign currency.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Interest earned is exempt from Indian income tax.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Deposits are generally available for maturities ranging from one to five years.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">FCNR(B) deposits are particularly attractive for NRIs seeking foreign currency returns without taking exchange rate risk.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Non-Resident External (NRE) Account<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">An NRE account is a <\/span><b>rupee-denominated account<\/b><span style=\"font-weight: 400;\"> used to park foreign earnings in India. Key features include:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Deposits are made using foreign currency and converted into Indian rupees.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Both principal and interest are fully repatriable.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Interest income is tax-free in India.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Available as savings, current, recurring, or fixed deposit accounts.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">NRE accounts are primarily used by NRIs to maintain and manage overseas earnings in India.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Non-Resident Ordinary (NRO) Account<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">An NRO account is meant for managing income earned in India. Sources of funds may include Rent, Dividends, Pension, Interest income and Other domestic earnings.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Key features include:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Account is maintained in Indian rupees.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Interest income is taxable in India.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Repatriation is permitted subject to prescribed limits and regulatory conditions.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">NRO accounts are generally used to manage domestic income streams while residing abroad.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>News Summary<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The RBI has temporarily withdrawn interest rate ceilings on:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Fresh <\/span><b>FCNR(B) deposits<\/b><span style=\"font-weight: 400;\"> with maturities between three and five years.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Fresh <\/span><b>NRE deposits<\/b><span style=\"font-weight: 400;\"> with maturities of three years and above.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">The relaxation is effective from <\/span><b>June 17, 2026, to September 30, 2026<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The measure is aimed at attracting larger foreign currency inflows at a time when policymakers are seeking to strengthen external sector stability and support the rupee.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The RBI has clarified that transfers from NRO accounts to NRE accounts will not qualify for the exemption.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Special Swap Facility for FCNR(B) Deposits<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A key element of the RBI&#8217;s strategy is the introduction of a <\/span><b>concessional foreign exchange swap facility<\/b><span style=\"font-weight: 400;\"> for FCNR(B) deposits.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Traditionally, when banks receive FCNR(B) deposits in foreign currency, they convert these funds into rupees for lending purposes.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This creates exchange rate risk because the bank must eventually repay the deposit in foreign currency.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To manage this risk, banks hedge their currency exposure, which typically costs around <\/span><b>2.9% to 3% annually<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Under the new arrangement, the RBI effectively absorbs a significant part of this hedging burden, reducing costs for banks and enabling them to offer higher interest rates to NRI depositors.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Sharp Increase in Deposit Rates<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Following the RBI&#8217;s announcement, several major banks significantly increased FCNR(B) deposit rates. Leading banks such as HDFC Bank, ICICI Bank, Axis Bank and Bank of Baroda are now offering interest rates of around <\/span><b>5.75% to 7%<\/b><span style=\"font-weight: 400;\"> on three-to-five-year FCNR(B) deposits.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Some banks raised rates by more than <\/span><b>300 basis points<\/b><span style=\"font-weight: 400;\">, making FCNR(B) deposits substantially more attractive than before.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">According to market experts, the yield advantage over comparable overseas deposits has widened to nearly <\/span><b>200-300 basis points<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Attractiveness Compared to Overseas Deposits<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The revised rates have made Indian FCNR(B) deposits highly competitive relative to foreign fixed-income products. For example:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Large US banks currently offer around <\/span><b>0.03% to 2%<\/b><span style=\"font-weight: 400;\"> on comparable long-term certificates of deposit (CDs)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Smaller US banks offer approximately <\/span><b>4% to 4.2%<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Indian FCNR(B) deposits are now offering as much as <\/span><b>7%<\/b><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This differential has significantly improved the attractiveness of FCNR(B) deposits for NRIs, especially those residing in regions such as the Gulf where foreign interest income may not face additional taxation.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Expected Capital Inflows<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Banks and analysts expect substantial inflows under the scheme. According to RBI data:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Outstanding NRE deposits stood at around <\/span><b>$7.94 billion in FY26<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Outstanding FCNR(B) deposits stood at approximately <\/span><b>$946 million<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Goldman Sachs estimates that the latest measures could attract between <\/span><b>$30 billion and $50 billion<\/b><span style=\"font-weight: 400;\"> in inflows during 2026.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">For comparison, a similar FCNR(B) mobilisation programme launched during the 2013 currency crisis generated nearly <\/span><b>$25 billion<\/b><span style=\"font-weight: 400;\"> in deposits.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Implications for the Economy<\/strong><\/h2>\n<ul>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The RBI&#8217;s measures are expected to:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Strengthen <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/what-is-foreign-exchange-reserves\/\" target=\"_blank\">foreign exchange reserves<\/a><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Improve dollar liquidity in the banking system<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Support the rupee against external pressures\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Lower funding costs for banks<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Facilitate overseas borrowing by public sector entities<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">At a time of global uncertainty and volatile capital flows, attracting stable NRI deposits can provide an important buffer for India&#8217;s external sector.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/indianexpress.com\/article\/business\/rbi-lifts-interest-rate-ceiling-fcnrb-nre-deposits-rupee-goldman-sachs-10744984\/#:~:text=%E2%80%9CThe%20interest%20rate%20ceiling%20applicable,2026%2C%E2%80%9D%20it%20said%20in%20a\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/www.thehindu.com\/business\/Economy\/rbi-allows-banks-to-offer-higher-interest-rates-to-nrispios-to-mobilise-forex\/article71114319.ece#google_vignette\" target=\"_blank\" rel=\"nofollow noopener\">TH<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>RBI has temporarily relaxed interest rate restrictions on FCNR(B) and NRE deposits to attract foreign capital inflows.<\/p>\n","protected":false},"author":21,"featured_media":108677,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[60,8187,22,59],"class_list":{"0":"post-108668","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-mains-articles","9":"tag-nri-deposits","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs-tag","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/108668","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/21"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=108668"}],"version-history":[{"count":2,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/108668\/revisions"}],"predecessor-version":[{"id":108670,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/108668\/revisions\/108670"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/108677"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=108668"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=108668"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=108668"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}