RBI to cover hedging costs enabling higher FCNR(B) deposit rates
Good news for NRIs: The Reserve Bank of India (RBI) is making foreign currency nonresident, FCNR(B), deposits more attractive.
If you open a new three- to five-year FCNR(B) deposit until September 30, 2026, the RBI will cover your currency hedging costs, and banks can now offer higher interest rates.
US dollar FCNR(B) yields 6%-7.13%
Right now, big banks are giving around 6% on US dollar FCNR(B) deposits, while smaller banks like Equitas Small Finance Bank go up to 7.13%.
That's better than US Treasury yields, plus the interest is tax-free in India.
Since your money stays in foreign currency, you don't have to worry about rupee depreciation, making FCNR(B) accounts a safer bet than regular NRE deposits.
Financial advisers recommend putting fresh investments here for stability and better returns, but suggest not breaking existing NRE deposits early to avoid penalties.