Bandhan Bank hikes FCNR deposit rates up to 7.1% for maturities of 3-5 years after RBI swap move

Private lender Bandhan Bank on Friday, 19 June, announced that it has revised upward the interest rates offered on Foreign Currency Non-Resident (Bank), or FCNR(B), deposits for non-resident Indian (NRI) customers.

Under the revised structure, the bank will offer an interest rate of 7.1% on US dollar-denominated FCNR(B) deposits of $1 million or more with maturities ranging between three and five years, according to an official statement.

For deposits below the $1 million threshold, the interest rate has been increased to 7%, the bank said.

"We are pleased to introduce this attractive FCNR(B) deposit offering for our NRI customers at a time when they are seeking stability and value in their overseas investments. This offering allows them to lock in competitive returns for a longer duration while effectively mitigating currency-related risks," said Rajinder Kumar Babbar, executive director and chief business officer of Bandhan Bank.

The move follows the Reserve Bank of India’s recent decision to introduce a USD-INR foreign exchange swap facility for banks on newly mobilised FCNR(B) deposits with tenures of at least three years and up to five years.

The RBI’s initiative is designed to attract greater foreign currency inflows into the banking system while helping improve domestic liquidity conditions.

Bandhan Bank said the enhanced FCNR(B) rates offer NRIs an opportunity to secure attractive returns over the medium to long term. The bank added that the deposits can also help investors limit currency-related risks, particularly against the backdrop of potential depreciation in the Indian rupee, while earning competitive returns on their foreign currency holdings.

FCNR accounts explained

FCNR, or Foreign Currency Non-Resident, accounts enable non-resident Indians to park their overseas earnings in India while retaining the funds in a foreign currency denomination.

For non-resident Indians, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs), managing income earned abroad can be challenging. An FCNR deposit account offers a structured solution by combining capital protection with fixed returns over a predetermined tenure.

What is an FCNR(B) account?

An FCNR(B), or Foreign Currency Non-Resident (Bank) account, is a term deposit account where funds are maintained in a foreign currency rather than converted into Indian rupees. Because the deposit remains in the original currency, account holders are protected from exchange-rate fluctuations during the deposit period.

Similar to a Non-Resident External (NRE) account, both the principal amount and interest earned on FCNR(B) deposits are exempt from tax in India.

The account functions much like a fixed deposit (FD) available to resident Indians, with one key distinction: deposits can only be made in designated foreign currencies. These include the US dollar (USD), Euro (EUR), Pound Sterling (GBP), Japanese Yen (JPY), Canadian Dollar (CAD), Australian Dollar (AUD), Danish Krone (DKK), Swiss Franc (CHF), and Swedish Krona (SEK).

FCNR(B) deposits are often viewed as an attractive investment avenue for NRIs, particularly those residing in countries where bank deposit rates are relatively low compared to those offered in India.

Tenure and features

As a fixed-term deposit product, FCNR(B) accounts require funds to remain invested for a specified period. Depending on the currency, the minimum tenure generally ranges from one to two years for deposits in EUR, JPY, CAD and AUD, and from one to three years for deposits in USD, GBP, DKK, CHF and SEK.

Key benefits

FCNR(B) account holders enjoy several advantages, including:

• Full repatriation of both principal and interest, allowing seamless transfer of funds between India and overseas bank accounts without currency conversion concerns.
• Protection against exchange-rate volatility since deposits remain in foreign currency throughout the tenure.
• Tax-free interest income in India, making the product particularly attractive for long-term savings.
• Access to overdraft or loan facilities against eligible NRE and FCNR deposits, providing liquidity during emergencies without breaking the deposit prematurely.