The Reserve Bank of India (RBI) on Wednesday announced a temporary withdrawal of the interest rate ceiling on fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits with maturities of three to five years and removed restrictions on interest rates for Non-Resident External (NRE) deposits with tenors of three years and above. The relaxation will remain in force until September 30, 2026.

The move is aimed at giving banks greater flexibility to attract overseas deposits from non-resident Indians (NRIs) and augment foreign currency inflows.

According to the RBI's amendment directions, the temporary relaxation applies to fresh deposits mobilised by banks as well as deposits renewed upon maturity. The revised rules came into effect immediately on June 17, 2026.

MUST READ: Banks hike FCNR(B) deposit rates to maximize RBI forex window

What changes for NRE deposits?

Under the existing framework, banks are not permitted to offer interest rates on NRE and NRO deposits higher than those available on comparable domestic rupee term deposits. However, the central bank has temporarily withdrawn this restriction for fresh NRE deposits with maturities of three years and above.

The exemption will also apply to renewed deposits, although transfers from NRO accounts to NRE accounts will not qualify for the relaxation.

The move gives banks the freedom to offer more competitive rates to attract longer-tenor NRE deposits from overseas Indians.

MUST READ: RBI's 2013 playbook brought in $34 bn. Can the latest scheme do it again?

FCNR(B) deposit caps removed

The RBI has also withdrawn the ceiling applicable to fresh FCNR(B) deposits with maturities ranging from three years to five years.

Before the change, interest rates on FCNR(B) deposits of three years and above up to five years were capped at the Overnight Alternative Reference Rate for the respective currency or swap plus 350 basis points. Deposits with maturities of one year to less than three years continue to remain subject to the existing cap of the reference rate or swap plus 250 basis points.

The temporary withdrawal of the ceiling means banks can now determine interest rates on eligible FCNR(B) deposits without being constrained by the earlier upper limit.

MUST READ: FCNR(B) vs NRE vs US Fixed Deposits: Which option makes more sense for NRIs?

Push to attract overseas funds

The relaxation comes at a time when banks are seeking to strengthen deposit growth and maintain adequate foreign currency resources. Similar measures have been used by the RBI in the past to encourage inflows from non-resident Indians during periods of tight liquidity or external sector pressures.

By allowing banks to offer higher rates on longer-tenor deposits, the central bank hopes to attract more durable overseas funds and support the domestic banking system.

MUST READ: RBI's FCNR(B) bet could bring ₹5.2-6.2 lakh crore into India, ease rupee pressure: SBI Research

The amendment has been issued under Section 35A of the Banking Regulation Act, 1949, and modifies the RBI's Commercial Banks – Interest Rate on Deposits Directions, 2025.

The relaxation is temporary and will remain in effect until September 30, 2026, after which the earlier framework could be restored unless the central bank decides otherwise.

MUST READ: BT Explainer: How a special window to attract FCNR (B) deposits can help bring in more forex

Published on: Jun 17, 2026 7:04 PM IST