The Reserve Bank of India (RBI) has allowed banks mobilising FCNR (B) deposits to extend loans against it to non-residents. It has also allowed banks to offer differential interest rates but it will have to be compliant with RBI’s existing directions on commercial banks interest rate on deposits.
 
In a bid to shore up its foreign exchange reserves amid heightened foreign institutional investor outflows from India’s equity market and the depreciation of the rupee against the US dollar, the RBI had on June 8, 2026, announced a special window to attract foreign currency deposits from non-resident Indians (NRIs).
 
Banks raising such FCNR (B) deposits would be able to swap them into rupees at a concessional rate. The swap facility would remain open to October 16, 2026, for deposits mobilised between June 8 and September 30, 2026.

Hedging costs
 
RBI would also bear the full hedging costs, allowing banks to offer attractive interest rates. Many banks have since raised their interest rates on FCNR (B) deposits, which now stand between 6% to little over 7%.
 
However, banks had sought certain clarifications related to issues like extending loans against the deposits. The RBI has now tried to address them.

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“Indian banks (including their overseas branches) are permitted to extend loans to a non-resident, or issue a SBLC (standby letter of credit) in favour of overseas lenders, against FCNR (B) deposits mobilised,” the central bank said on Tuesday.
 
It has also permitted banks to extend loans to the FCNR (B) account holders and mark lien (essentially a temporary freeze on funds) on such deposits.

Swap facility
 
RBI had announced the swap facility for fresh FCNR (B) deposits mobilised for a minimum tenor of three years and maximum five years.
 
It has clarified that banks will be allowed to undertake swaps for tenors of less than three years provided they have mobilised fresh eligible FCNR (B) deposits for minimum original tenor of three years as per the scheme.
 
Notably, banks have been allowed to continue offering regular FCNR (B) deposits without availing the swap facility for deposits with a tenor of three years and above up to five years, without the requirement of a minimum lock-in period of one year. However, banks will have to separate records for such deposits.

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Published on: Jun 23, 2026 7:38 PM IST