How NRIs, OCIs may benefit as RBI allows banks to offer higher interest rates on certain FCNRs, NREs

The Reserve Bank of India (RBI) has temporarily relaxed interest rate restrictions on certain Non-Resident External (NRE) and Foreign Currency Non-Resident [FCNR(B)] deposits to attract more foreign currency inflows. The relaxation of interest rates on certain FCNR(B) deposits and NREs will be applicable till September 30, 2026, as per a statement from the Central Bank.

The removal of restrictions means banks may now increase their NRE and FCNR(B) deposit interest rates based on their funding requirements and market conditions during this period. NRIs planning to open or renew such FCNR(B) or NRE deposits may therefore see higher interest rate offerings from banks in the coming weeks.

Also read: FCNR deposit rates up to 6.5%: Bank of Baroda, Indian Overseas Bank and others launch schemes for NRIs, OCIs

What is RBI’s new direction about FCNR(B) and NRE deposits?

As per the Reserve Bank of India (Commercial Banks – Interest Rate on Deposits) Amendment Directions, 2026 issued on June 17, 2026, the RBI has decided to temporarily withdraw interest rate ceiling on fresh FCNR(B) deposits of 3-5 year tenors and restriction on interest rates on NRE deposits of 3 year and above tenors, including the deposits that are renewed upon maturity, from June 17, 2026, to September 30, 2026.

Interest rate cap on NRE deposits of 3 years and above temporarily withdrawn

Earlier, banks were not allowed to provide NRE deposit rates that were greater than their equivalent domestic term deposit rates.

Banks are now permitted to offer higher rates on new NRE deposits of of three years or longer

The relaxation applies to fresh deposits mobilised by banks as well as deposits that are renewed upon maturity during the specified period.

The notification stated, “The said restriction with respect to interest rates offered on fresh NRE deposits mobilised by banks, including the deposits that are renewed upon maturity, for three years and above tenors, is temporarily withdrawn with effect from June 17, 2026, for the period until September 30, 2026. Any transfer from NRO accounts to NRE accounts shall not qualify for such exemption.”

Removed the interest rate ceiling on FCNR(B) deposits of 3-5 years

For FCNR(B) deposits, banks were previously required to adhere to a ceiling rate set by the RBI. Banks are now able to offer rates higher than the prior cap for new FCNR(B) deposits with tenors ranging from three to five years. This also holds true for deposits that are renewed when they mature.