The Reserve Bank of India (RBI), in a move aimed at enhancing foreign currency inflows and providing greater flexibility to banks in mobilizing deposits from Non-Resident Indians (NRIs), has temporarily eased interest rate regulations applicable to certain NRE and FCNR(B) deposits.
The RBI has issued the Reserve Bank of India (Commercial Banks - Interest Rate on Deposits) Amendment Directions, 2026, effective from June 17, 2026. The amendment temporarily withdraws the interest rate ceiling on fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits with tenures ranging from three to five years and removes restrictions on interest rates offered on Non-Resident External (NRE) deposits with tenures of three years and above. The relaxation will remain in force until September 30, 2026.
What Has Changed?
Under the amended framework:
- Banks can now offer interest rates on fresh NRE deposits of three years and above without being constrained by the earlier restrictions applicable to such deposits.
- The interest rate ceiling on fresh FCNR(B) deposits with maturities between three and five years has also been temporarily withdrawn.
- The relaxation applies to fresh deposits as well as deposits renewed upon maturity during the specified period.
Existing Rules Continue for Other Deposits
The RBI has clarified that NRE and NRO deposit rates will generally continue to be linked to comparable domestic rupee term deposit rates. However, the temporary exemption specifically applies to fresh NRE deposits of three years and above mobilized during the relaxation period. Transfers from NRO accounts to NRE accounts will not qualify for this exemption.
Why This Move Matters
The relaxation is expected to help banks attract larger deposits from overseas Indians at a time when global interest rate dynamics remain competitive. By allowing banks greater freedom in setting deposit rates, the RBI aims to encourage additional foreign currency inflows and strengthen the availability of stable overseas funds within the banking system.
Effective Date
The amended directions came into force on June 17, 2026, and will remain applicable until September 30, 2026, unless extended or modified by the RBI.
Key Takeaway
NRIs looking to park funds in India may benefit from potentially higher returns on eligible NRE and FCNR(B) deposits over the coming months, while banks gain increased flexibility to compete for overseas deposits and bolster foreign currency resources.
Click here to view the official copy of the notification
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