RBI Allows Higher Rates on Select NRI Deposits

Synopsis: RBI allows banks to offer higher interest rates on select NRI deposits, including NRE and FCNR(B) accounts, to attract overseas funds and strengthen foreign exchange inflows into India until September 2026.

The Reserve Bank of India (RBI) allows banks to offer higher interest rates on certain deposits held by Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) as part of measures to increase foreign exchange inflows into the country. The move provides greater flexibility to banks in attracting overseas funds through specific non-resident deposit schemes.

Under the revised framework, banks can offer enhanced interest rates on Foreign Currency Non-Resident deposits and Non-Resident External (NRE) deposits beyond the existing limits. The relaxation is aimed at making these deposit instruments more attractive for overseas Indians and encouraging them to bring more funds into the Indian banking system.

The RBI’s decision comes amid efforts to strengthen India’s foreign exchange reserves and improve the availability of overseas capital. By allowing banks to provide better returns, the central bank expects greater participation from NRIs and other eligible overseas investors in these deposit programmes.

Also Read: India Hands Over Military Equipment to Sri Lanka

The temporary relaxation applies to fresh deposits raised under eligible categories and will remain effective until September 30, 2026. The measure is expected to support banks in mobilising foreign currency resources while helping manage external sector requirements.

FCNR(B) deposits allow NRIs to hold savings in foreign currencies, protecting them from exchange rate fluctuations, while NRE deposits enable overseas Indians to maintain rupee-denominated accounts with repatriation benefits. With the revised rules, banks gain more room to compete for overseas deposits by offering improved returns.

The move is part of a broader set of measures introduced by the Reserve Bank of India to enhance foreign currency inflows. Earlier initiatives include providing support for hedging costs related to eligible FCNR(B) deposits, reducing the burden on banks and making foreign currency deposits more attractive.

Industry observers expect the policy change to benefit both banks and overseas Indian investors. While banks receive access to additional foreign currency resources, NRIs and PIOs get an opportunity to earn potentially higher returns on their deposits in India.

The RBI’s latest step highlights its focus on improving external financial stability while leveraging the global Indian diaspora as an important source of foreign exchange. By creating a more competitive environment for non-resident deposits, the central bank aims to support liquidity and strengthen India’s financial position.