The Reserve Bank of India (RBI) has temporarily withdrawn the interest rate ceiling on fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits of three to five years and removed restrictions on interest rates offered on Non-Resident External (NRE) deposits of three years and above, in a move aimed at boosting foreign currency inflows into the banking system.
The relaxation will be available from June 17, 2026, until September 30, 2026, according to the Reserve Bank of India (Commercial Banks – Interest Rate on Deposits) Amendment Directions, 2026.
The revised norms
Under the revised norms, banks will be free to offer interest rates on fresh FCNR(B) deposits of three years and above up to five years without being subject to the existing regulatory ceiling. The exemption will also apply to eligible deposits renewed upon maturity.
Similarly, the RBI has temporarily removed the restriction that interest rates on NRE deposits cannot exceed rates offered on comparable domestic rupee term deposits for fresh NRE deposits with tenors of three years and above. The relaxation will also apply to renewed deposits, although transfers from NRO accounts to NRE accounts will not qualify for the exemption.
Prior to the amendment, FCNR(B) deposits with maturities of three to five years were subject to a ceiling of the overnight alternative reference rate or swap rate for the respective currency plus 350 basis points.
The move comes amid efforts to attract additional non-resident deposits and strengthen foreign currency inflows at a time when banks are seeking stable funding sources to support credit growth and manage liquidity requirements.
The amendment takes immediate effect and will remain in force until September 30, 2026, after which the earlier regulatory restrictions are set to be reinstated unless further extended by the central bank.
