What Is Driving This $28 Billion Rush?
The massive inflow is a direct result of a strategic move by the Reserve Bank of India (RBI). In early June 2026, the central bank announced a special window, open until September 30, 2026, designed to attract foreign currency. The RBI essentially created
a concessional swap facility that helps cover the currency hedging costs for banks on Foreign Currency Non-Resident (FCNR) deposits with tenures of three to five years. By absorbing this cost, the RBI has enabled banks to offer significantly higher interest rates to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). This incentive, combined with global market uncertainties, has made these deposits an incredibly attractive, stable investment, leading to a surge in outstanding FCNR deposits from around $32.6 billion on June 5 to over $60.5 billion by July 30, 2026 — a net increase of nearly $28 billion.
A Quick Primer on FCNR Deposits
For the uninitiated, an FCNR (Bank) deposit, or FCNR(B), is a fixed deposit account that allows NRIs and OCIs to hold their earnings in a foreign currency within an Indian bank. You can open these accounts in currencies like the US Dollar (USD), British Pound (GBP), Euro (EUR), and others. The primary advantage is protection against currency risk; since your money is never converted to Indian Rupees, you are insulated from any fluctuations in the INR's value. Furthermore, the interest earned on FCNR deposits is tax-free in India, and both the principal amount and the interest are fully repatriable, meaning you can transfer the funds back overseas without restrictions.
How the Top Banks Compare
With the RBI’s new scheme, banks have become aggressive in attracting FCNR funds, leading to a competitive rate environment, especially for US Dollar deposits with longer tenures. As of early August 2026, Punjab National Bank (PNB) is advertising one of the highest rates, offering up to 6.60% on five-year USD deposits. Following closely are several major private banks. HDFC Bank and ICICI Bank have both revised their rates upwards, offering 6.25% on USD deposits for tenures between three and five years. However, ICICI Bank's top rate may be linked to larger deposit amounts. Kotak Mahindra Bank is also in the running, offering 6.30% for certain five-year deposits. The country's largest lender, State Bank of India (SBI), is offering rates around 6% for five-year deposits, with slight variations based on the deposit amount. Axis Bank has also matched the 6% rate for similar tenures.
Who Mobilised the Most?
The $28 billion inflow was not evenly distributed. According to government data, private sector banks led the charge by mobilising $10.7 billion, closely followed by public sector banks at $8.8 billion and foreign banks at $8.4 billion. Interestingly, the mobilisation was highly concentrated among a few key players. Among individual banks, HSBC saw the highest inflows, collecting a remarkable $6.14 billion. State Bank of India followed, attracting $4.12 billion, with ICICI Bank coming in third with $3.70 billion in fresh FCNR deposits during this period. This shows that while many banks are participating, the largest and most globally connected institutions have been the biggest beneficiaries of the deposit rush.
What to Consider Beyond Interest Rates
While a high interest rate is the main draw, it's not the only factor to consider. The special RBI window applies to deposits with a three to five-year tenure, and these often come with a mandatory one-year lock-in period, during which premature withdrawal is not permitted. After one year, penalties for early withdrawal may apply, so it's crucial to check each bank's specific terms and conditions. Also, consider the bank's customer service, digital banking capabilities, and the ease of opening and managing the account from overseas. Some banks may have different rates based on the deposit amount, so be sure to check the fine print for the specific slab your investment falls into.
