Dear Reader,
Every generation of Indians abroad has faced the same quiet question: where does one keep the wealth that a life overseas creates? The diaspora’s relationship with India has always been more than sentimental. It has been financial, and at moments of stress for the Indian economy, it has been decisive. Over seven decades, successive governments and the Reserve Bank of India have built instruments that let this relationship work both ways, giving the diaspora secure, efficient ways to hold Indian-linked wealth, while giving India a stable channel of foreign currency support.
We find ourselves in one such moment again. Currency markets remain unsettled, interest rate cycles across major economies are diverging, and geopolitical risk has become a permanent feature of portfolio planning rather than an occasional disruption. Against that backdrop, the case for holding a portion of one’s savings in a currency one already earns and spends, rather than converting it into an unfamiliar one, deserves fresh attention.
This issue looks closely at FCNR(B) deposits: a facility that has existed since 1993, but which has moved back into sharp focus following the Reserve Bank of India’s 2026 concessional swap window. We set out its history, its mechanics and its place alongside other NRI deposit options, so that readers can judge for themselves where it fits within a broader plan for preserving and growing wealth across borders.
Chairman and Founder
The last few years have made currency risk a mainstream concern rather than a specialist one. Interest rate paths in the United States, the eurozone and the United Kingdom have moved unevenly, and the rupee itself has not been immune. Between April 2025 and mid-January 2026, the rupee depreciated by roughly 5.4 per cent against the US dollar, according to the Economic Survey 2025-26 tabled in Parliament. For an NRI holding rupee-denominated savings in India, that single data point represents a real erosion of value once converted back into dollars, pounds or euros.
For India’s overseas diaspora, the practical question this raises is not whether to invest in India, but in which currency to do so. Non-resident Indians increasingly want the benefits of India’s growth story and its relatively attractive deposit rates, without taking on the added uncertainty of rupee movements over the life of an investment. This is precisely the gap that FCNR(B) deposits are designed to close, and it is why the scheme has returned to prominence in 2026.
FCNR(B) stands for Foreign Currency Non-Resident (Bank) deposit. It is a term deposit that Non-Resident Indians, Overseas Citizens of India and Persons of Indian Origin can open with an authorised Indian bank, but crucially, the deposit itself is held in a foreign currency rather than in rupees. Commonly offered currencies include the US dollar, British pound, euro, Japanese yen, Australian dollar and Canadian dollar, though the exact list varies by bank.
The deposit runs for a fixed tenure of between one and five years. There is no FCNR savings account; it exists only as a term deposit. At maturity, the depositor receives the original principal plus accrued interest in the same foreign currency in which it was deposited. No conversion into rupees and back takes place at any point, which is the source of its central appeal: since both what goes in and what comes out are denominated in the same foreign currency, the depositor carries no exchange-rate risk on the deposit itself. That risk sits with the bank, not the customer.
Interest earned on FCNR(B) deposits is exempt from Indian income tax under Section 10(15)(iv)(fa) of the Income Tax Act, 1961, and no tax is deducted at source. Both principal and interest are fully and freely repatriable, without the ceilings that apply to some other NRI accounts. It is worth being precise about what the product does and does not protect against: it protects the depositor from movements in the rupee-foreign currency exchange rate during the tenure, but it does not protect against interest rate risk, inflation in the currency of deposit, or the opportunity cost of locking funds away for several years.
The origins of India’s foreign currency deposit schemes lie in the mid-1970s, when the Reserve Bank of India introduced the FCNR(A) scheme in 1975. Under FCNR(A), the RBI itself guaranteed the exchange rate to depositors, which meant the central bank, and ultimately the government, absorbed the currency risk rather than the depositor or the bank. This made the scheme attractive to NRIs, but it left the RBI carrying an open-ended liability every time the rupee moved.
That structure came under severe strain during India’s 1991 balance of payments crisis. Foreign exchange reserves fell to a level widely reported as around one to 1.2 billion US dollars, sources vary slightly on the precise figure, sufficient for only a few weeks of imports. The government pledged and physically moved 67 tonnes of gold to the Bank of England and the Union Bank of Switzerland to raise emergency loans, and the rupee was devalued by roughly 18 to 19 per cent against major currencies in two steps in July 1991. NRI deposit withdrawals, including from FCNR(A), were among the factors that accelerated the outflow of reserves in the months before the crisis, since net NRI deposit inflows had already turned negative from September 1990.
In response, the RBI redesigned the scheme. The FCNR(B) scheme was introduced on 15 May 1993, replacing FCNR(A). The critical change was that the exchange rate guarantee was removed: under FCNR(B), the foreign exchange risk shifted to the banks accepting the deposits, not the RBI. FCNR(A) itself was withdrawn in a phased manner from 15 August 1994, with existing deposits allowed to run off, and the final tranches maturing by around 1997. Today, every FCNR deposit in India is an FCNR(B) deposit; the FCNR(A) structure no longer exists.
FCNR(B) has since served as a policy lever at two further moments of external stress. In September 2013, following the taper tantrum triggered by signals of US Federal Reserve tightening, the RBI opened a special concessional swap window on 4 September 2013, allowing banks to swap fresh FCNR(B) deposits of at least three years’ maturity at a fixed rate of 3.5 per cent per year, well below prevailing market hedging costs. The window closed on 30 November 2013. Reported totals vary by source: figures commonly cited put FCNR(B)-specific inflows at approximately 26 to 27 billion US dollars, with the two swap windows combined (including foreign currency borrowings) raising roughly 34 billion US dollars in total.
The most recent chapter began in 2026. Following a Governor’s announcement on 5 June 2026 as part of a broader capital-inflow package, the RBI operationalised a new concessional swap facility on 8 June 2026, covering fresh or renewed FCNR(B) deposits with maturities of three to five years, mobilised between 8 June and 30 September 2026. Under this facility, the RBI absorbs the currency-hedging cost that banks would otherwise bear on eligible deposits, through an at-par, non-cancellable swap, and eligible deposits also carry a one-year lock-in along with exemptions from cash reserve ratio and statutory liquidity ratio requirements. By 31 July 2026, the RBI reported total inflows of approximately 40.8 billion US dollars under the combined facility, of which about 36.7 billion US dollars came through FCNR(B) deposits specifically, already exceeding the total raised during the entire 2013 window. SBI Research has projected FCNR(B) mobilisation could reach 65 to 70 billion US dollars by the scheme’s close, though this remains a projection rather than a confirmed outcome.
FCNR(B) deposits are not simply a retail banking product; they are a capital account instrument that the RBI uses to manage India’s external position. Foreign currency inflows through FCNR(B) deposits add directly to the foreign currency assets held by Indian banks and, through them, support the broader stability of the balance of payments. When global conditions make the rupee volatile, or when the current account deficit widens, attracting stable, longer-tenure foreign currency deposits reduces India’s reliance on more volatile short-term portfolio flows.
This is precisely why the scheme has resurfaced twice at moments of external stress, in 2013 and again in 2026. Ahead of the 2026 measures, FCNR(B) inflows had in fact fallen sharply, from 7.08 billion US dollars in FY25 to just 946 million US dollars in FY26, prompting the RBI’s intervention. By making the scheme more attractive to banks and, in turn, to depositors, the RBI can rebuild a channel of foreign currency inflow without directly intervening in the spot currency market. For NRIs, the same instrument that serves this policy objective also offers a secure, tax-efficient way to hold savings, which is why the interests of the depositor and of Indian monetary policy have, at these moments, aligned unusually closely.
FCNR(B) deposits are not a universal fit, but for several categories of investor they solve a specific problem.
A useful way to frame the decision: FCNR(B) suits money that is already in a foreign currency and does not need to become rupees any time soon. Money that is already Indian-sourced, or that the investor is confident will be needed in rupees, is generally better suited to an NRE or NRO structure, discussed further below.
Three developments make 2026 a particularly relevant year to review FCNR(B) as part of a wealth plan, though each should be weighed against its own limitations.
As set out above, the RBI is currently absorbing the hedging cost that banks would normally bear on eligible three-to-five-year FCNR(B) deposits mobilised up to 30 September 2026. This has allowed several banks to raise published FCNR(B) rates materially, with some analyst estimates suggesting rates in the region of 5.5 to 6.6 per cent per annum on US dollar deposits, though the RBI does not guarantee any specific rate, banks retain full discretion in pricing, and rates vary by bank, currency and tenure. Readers should check current published rates directly with their bank rather than rely on any figure quoted in this newsletter, since the transmission of the RBI’s facility into individual bank rates has occurred at different speeds across institutions.
India’s foreign exchange reserves stood at approximately 701.4 billion US dollars as of 16 January 2026, up from 668 billion US dollars at the end of March 2025, and were sufficient to cover around 11 months of merchandise imports according to the Economic Survey 2025-26. India also remained the world’s largest recipient of remittances in FY25, with inflows of 135.4 billion US dollars. These figures suggest a considerably stronger starting position than in 1991 or even 2013, which is worth bearing in mind when assessing how much genuine urgency the current scheme reflects, as opposed to a more routine effort to diversify India’s external funding base.
The swap facility itself is temporary and closes to new eligible deposits on 30 September 2026. Deposits booked under the scheme also carry a mandatory one-year lock-in, with premature withdrawal penalties applying if funds are withdrawn after the lock-in but before full maturity. Investors should not treat the scheme’s existence as a reason to invest regardless of their own liquidity needs; a deposit that cannot be touched without penalty for one to five years is only appropriate for funds genuinely not needed over that horizon.
On balance, the current environment offers a rare combination of favourable pricing and a well-understood, RBI-regulated structure. It does not, however, change the fundamental risks of any fixed-tenure deposit: opportunity cost if rates rise further after locking in, and limited liquidity before maturity.
A second, more recent development deserves its own treatment, because it changes the return profile of FCNR(B) far more than the swap window alone. Banks have long been permitted to lend against FCNR(B) deposits, taking a lien on the deposit as security. What changed in 2026 is that the RBI, in a Frequently Asked Questions document issued alongside the swap facility, explicitly confirmed that banks, including their overseas branches, may extend loans to FCNR(B) account holders and mark a lien on those deposits. That clarification, together with the lower funding costs the swap window has given banks, has allowed several lenders to price loans against fresh FCNR(B) deposits below the deposit rate itself, something that does not happen under the standard, pre-2026 loan-against-deposit product, where the loan rate is typically set at a margin above the deposit rate.
The mechanics are straightforward. A depositor places a fixed sum, say 50,000 US dollars, in an FCNR(B) deposit at the prevailing rate for their chosen tenure. The bank then extends a loan in the same currency against that deposit, in some cases up to several times the original principal, at a rate below the deposit rate. Because both the deposit and the loan sit in the same foreign currency with the same bank, there is no additional exchange-rate exposure created by the leverage itself; the depositor is simply borrowing and redepositing in the same currency, capturing the gap between the two rates on the borrowed portion. One public sector bank’s current published scheme illustrates the arithmetic: a deposit rate of around 6.5 to 6.6 per cent against a loan rate of around 5.75 per cent, with leverage available up to nine times the deposit amount, is advertised as producing an average yield, after interest cost, of up to roughly 12 to 13 per cent per year on the original capital at the five-year tenor, once bank charges are factored in and bearing in mind that this figure represents a compounded annual growth rate rather than a simple annual yield. Independent brokerage research covering the sector more broadly has estimated that such leveraged FCNR(B) structures could deliver annual returns in the region of 12 to 18 per cent, depending on the tenure and leverage ratio chosen, with banks in turn earning additional spread income of roughly 0.65 percentage points by deploying the borrowed funds.
The word yield in that context needs careful reading. What is being described is a geared, or leveraged, return on the depositor’s own capital, not a market yield in the conventional sense, and it depends entirely on the loan rate staying below the deposit rate for the full tenure and on the depositor’s ability to service the arrangement throughout. Several features of the standard loan-against-FCNR(B) product carry over and matter here: banks typically require the loan to run for the same period as the deposit, interest on the loan is usually payable each quarter rather than simply netted at maturity, and under RBI-linked guidelines a default on two consecutive quarterly interest payments can trigger premature liquidation of the underlying deposit to recover the loan. Overdraft facilities against deposits booked under the 2026 swap scheme also typically become available only after the one-year lock-in has passed, since premature access to the deposit itself is restricted before then.
For a sophisticated investor, a locked-in positive spread between a foreign-currency loan and a foreign-currency deposit at the same bank, with no incremental currency risk, is a genuinely attractive structure, and it explains why this overlay has attracted attention well beyond any single bank’s marketing. It is not, however, a risk-free arbitrage. It concentrates both the deposit and the offsetting loan with a single institution, so counterparty and concentration risk rise with the leverage multiple rather than falling. It requires the discipline and cash flow to service loan interest on schedule for years at a time. It depends on terms, loan pricing and leverage ratios that individual banks can and do vary, and that were only clarified by regulators in the middle of 2026, meaning the product is still young and its terms may evolve. Advertised yield figures such as those above are illustrative calculations by the offering bank or by brokerage analysts, not guaranteed outcomes, and should be verified, tenor by tenor and bank by bank, before any commitment is made. As with the base FCNR(B) product, this structure suits investors with a genuine foreign-currency surplus, a multi-year horizon and the capacity to service the loan leg without strain, rather than being a substitute for a properly diversified wealth plan.
NRIs typically choose between three principal deposit structures in India. The table below summarises the key differences.
| Feature | FCNR(B) | NRE Fixed Deposit | NRO Fixed Deposit |
| Currency of deposit | Foreign currency (e.g. USD, GBP, EUR, JPY, AUD, CAD) | Indian rupees | Indian rupees |
| Source of funds | Foreign earnings only | Foreign earnings only | Income arising in India (rent, dividends, pension) |
| Exchange-rate risk on the deposit itself | None. The bank bears the currency risk, not the depositor | Yes. Rupee depreciation or appreciation affects the foreign-currency value at repatriation | Not applicable in the same sense, but repatriated proceeds are exposed at the point of conversion |
| Taxation of interest in India | Fully exempt under Section 10(15)(iv)(fa) of the Income Tax Act, 1961; no TDS | Fully exempt under Section 10(4)(ii); no TDS | Fully taxable, with TDS typically around 30 per cent plus applicable cess, reducible under a Double Taxation Avoidance Agreement with a Tax Residency Certificate and Form 10F |
| Repatriability | Principal and interest fully and freely repatriable | Principal and interest fully and freely repatriable | Capped at USD 1 million per financial year, with Form 15CA and CA-certified Form 15CB |
| Typical tenure | 1 to 5 years (term deposit only) | As short as 7 days, up to 10 years, though tax-free status generally assumes a genuine term deposit | As short as 7 days, up to 10 years |
| Best suited for | NRIs who want to hold savings in foreign currency and avoid rupee risk entirely | NRIs comfortable taking a rupee view, or planning eventual return to India | NRIs who must park India-sourced income such as rent or pension |
Note: figures and thresholds above reflect rules understood to be current as of August 2026. Specific bank policies on joint holding, minimum deposit and premature withdrawal penalties vary and should be confirmed directly with the relevant bank.
Locking into a fixed rate for three to five years means missing out if rates rise further during the tenure, and being stuck above market if global rates fall.
Funds committed to an FCNR(B) deposit are not available for other opportunities, whether in equities, real estate or other asset classes, for the duration of the tenure.
Most banks pay no interest on withdrawals before one year, and deposits booked under the current RBI swap scheme carry a mandatory one-year lock-in with penalties on early withdrawal thereafter.
While FCNR(B) removes rupee risk, it does not protect against inflation eroding the real purchasing power of the foreign currency itself.
RBI rules on eligible currencies, tenure and interest rate ceilings have changed multiple times since 1975, and the concessional terms available in 2026 are explicitly temporary.
FCNR(B) is a capital preservation and currency-hedging tool, not a growth instrument. Investors seeking higher long-term returns should weigh it against, rather than in place of, other elements of a diversified portfolio.
FCNR(B) deposits deserve to be understood as more than an especially well-timed fixed deposit. They are one of a small number of instruments that let an NRI hold Indian-linked wealth entirely on their own currency terms, insulated from the rupee’s movements, while remaining within India’s regulated banking system and its tax-free treatment of interest income. That combination, currency neutrality, tax efficiency and full repatriability, is genuinely difficult to replicate through other means.
The RBI’s 2026 concessional swap window has made the timing more attractive than it has been in over a decade, but the decision to use FCNR(B) should not rest on the rate on offer this quarter. It should rest on the broader shape of an investor’s finances: how much of their wealth is genuinely foreign-currency in nature, how soon they might need it, and how that sits alongside their rupee-denominated assets, their equity exposure and their long-term plans, including any intention to eventually return to India.
India’s financial architecture for its diaspora has evolved considerably since 1975, from a scheme that placed currency risk on the central bank, to one that places it squarely on the banking system, to a 2026 environment in which policy support and depositor interest have converged unusually closely. As global currency markets remain unsettled and India’s external position continues to strengthen, FCNR(B) is likely to remain a relevant tool for globally mobile Indians for as long as that combination of stability and uncertainty persists. The task for each investor is not to chase the headline rate, but to decide, deliberately, how large a role foreign-currency savings should play in their overall wealth plan, and to size their FCNR(B) allocation accordingly.
Reserve Bank of India, Master Directions and circulars on Foreign Currency (Non-Resident) Deposits, including the operational circular of 8 June 2026 establishing the concessional swap facility for FCNR(B) deposits, Overseas Foreign Currency Borrowings and External Commercial Borrowings.
Ministry of Finance, Government of India, Economic Survey 2025-26, tabled in Parliament, on foreign exchange reserves, the current account deficit and rupee performance.
Press Information Bureau, Government of India, release on India’s remittance inflows and external sector position, referencing the Economic Survey 2025-26.
India Brand Equity Foundation (IBEF), news summary on India’s remittance inflows, FDI and foreign exchange reserves, 2026.
Business Standard, reporting on the RBI’s 2026 concessional swap window and its comparison with the 2013 FCNR(B) swap scheme, various dates between June and August 2026.
Business Standard, archival reporting on the RBI’s September 2013 FCNR(B) swap window and its final mobilisation figures.
Business Standard, archival reporting on the phased withdrawal of the FCNR(A) scheme between 1994 and 1997.
SPJIMR Newsroom, commentary by Prof. Ananth Narayan on the 2013 RBI FCNR(B) swap window and its structure.
Science Publishing Group, International Journal of Economics, Finance and Management Sciences, research article on the causes of India’s 1991 balance of payments crisis.
Reserve Bank of India, historical commentary and press summaries on the 1991 balance of payments crisis, gold pledging and rupee devaluation.
Bank-published FAQs and rate disclosures (ICICI Bank, HDFC Bank, Union Bank of India, Ujjivan Small Finance Bank, Axis Bank via Policybazaar, Kotak Mahindra Bank) on FCNR(B) product features, eligible currencies and current indicative rates, June to July 2026. Note: bank-published rate figures are indicative and change frequently; readers should verify current rates directly with individual banks.
Income Tax Act, 1961, Section 10(15)(iv)(fa) and Section 10(4)(ii), on the tax treatment of FCNR(B) and NRE interest income respectively.
General note on sourcing: where reported figures for historical events conflict between sources, for example the precise level of foreign exchange reserves in 1991 or the FCNR(B)-specific share of the 2013 swap mobilisation, this newsletter has presented the range reported and flagged the discrepancy rather than selecting a single figure.
Indices | 01st July 2026 | 31stJuly 2026 | HIGH | LOW |
BSE S&P SENSEX | 76545.21 | 78094.64 | 78664.92 | 75474.43 |
NIFTY 50 | 23897.65 | 24383.60 | 24530.90 | 23606.30 |
(INR. In Lakh Crore)
Particulars | AUM As On 31-05-2026 | Fresh Fund Mobilize During June–2026 | Redemption During June–2026 | AUM As On 30-06-2026 |
Total AUM of all mutual funds scheme | 82.55 | 15.19 | 15.69 | 82.05 |
AUM of equity oriented (growth) schemes | 37.05 | 0.68 | 0.39 | 37.34 |
Source: Association of Mutual Fund of India (AMFI)
(INR. In Lakh Crore)
| Month | SIP Contribution | SIP AUM |
| June-2026 | 31,781 | 17,70,482 |
(INR. In Lakh Crore)
| FII / DII | Gross Purchase | Gross Sale | Net |
| FII | 3.29 Lakh | 3.35 Lakh | Selling: 0.06 Lakh |
| DII | 4.07 Lakh | 3.72 Lakh | Buying: 0.35 Lakh |
