NRIs Can Now Earn Up to 6% on Forex Deposits as ICICI Bank & Major Lenders Raise FCNR(B) Rates

ICICI Bank, India's second-largest private sector lender, raised interest rates on FCNR(B) deposits by up to 310 basis points, taking rates to as high as 6% for deposits with maturities of three to five years, effective June 11. Both ICICI Bank and Axis Bank are offering a uniform interest rate of 6% on FCNR(B) deposits across all maturities between three and five years.

FCNR(B) is the Foreign Currency Non-Resident (Bank) deposit. These are term deposit accounts where NRIs park money in foreign currencies like USD, GBP, EUR, AUD, CAD, etc., so they carry no exchange rate risk for the depositor.

The Reserve Bank of India has introduced special rules for FCNR(B) deposits, which are foreign currency fixed deposits made by Non-Resident Indians in Indian banks.

Normally, when banks accept deposits in foreign currencies such as US dollars, they have to spend money to protect themselves against exchange rate fluctuations, which is called hedging, and it typically costs around 3.5%.

Under this special scheme, the RBI took on the hedging cost instead of the banks. Since banks no longer had to bear this expense, they were able to offer much higher interest rates to NRIs, around 2 points (200 basis points) more than usual.

The idea was to bring more foreign currency into India, helping boost the country's foreign exchange reserves and support the rupee.

Other Banks That Also Followed ICICI's Lead

Kotak Mahindra Bank raised FCNR(B) rates to as much as 6.15% for deposits above $1 million with maturities of three to five years. Deposits below $1 million in the same bucket earn 6%.

Bank of Baroda launched a special FCNR(B) scheme effective June 11, offering up to 6% on USD deposits, 4.75% on GBP and AUD, 5.15% on CAD, and 3.75% on euro deposits.

SBI launched its SBI Advantage FCNR(B) Deposit, offering a peak rate of 6% for deposits above $1 million with a five-year tenor.
HDFC Bank raised rates by up to 260 bps, offering up to 6% in the three- to five-year maturity bucket.

Karur Vysya Bank raised its peak rate by over 300 bps to 7% for 3 to 5 year deposits.

AU Small Finance Bank raised its peak rate by 195 bps to 7.1%.