Widely read:
Ujjal Das/AI-Generated Image
Summary: The last time RBI ran a scheme like this was 2013, when a currency crisis forced Raghuram Rajan to use the same playbook. That window raised $34 billion in weeks. The window just reopened. And the conditions that forced it are worth understanding before you decide whether to use it
If you are an NRI with dollar savings sitting in a US bank account at 4-5 per cent, the Reserve Bank of India just opened a window that deserves your attention. For the next three months, Indian banks can offer you 5.5 per cent to 7 per cent per annum on a dollar fixed deposit, tax-free in India. The window closes September 30.
This is not routine. The last time RBI ran a scheme like this was 2013, when a currency crisis forced Governor Raghuram Rajan to use the same playbook. That window raised $34 billion from the NRI community in weeks. The rupee stabilised. RBI's reserves grew.
The situation today is similar. The Hormuz crisis pushed oil above $100 a barrel. The rupee has fallen about 7 per cent in 2026. India's forex reserves dropped from a February peak of $728 billion to around $682 billion. NRI dollar deposit inflows, which were $7 billion in FY25, collapsed to under $1 billion in FY26. RBI needed a lever. This is it.
How it works
The product is called an FCNR(B) deposit — Foreign Currency Non-Resident (Bank). It is a term deposit held in foreign currency at an Indian bank. You deposit dollars, you receive dollars back at maturity. There is no rupee conversion, so there is no rupee depreciation risk. Interest accrues in the same currency.
Normally, banks bear a hedging cost when they raise dollar deposits and deploy the money in India. That cost typically runs 2-3 per cent per year, which caps what banks can offer depositors. RBI's new circular removes that cost entirely. Under the scheme, banks can swap their dollar inflows with RBI at the same exchange rate, in and out, with no cost. RBI absorbs the currency mismatch on its own balance sheet. Banks pass the saving on to you as a higher rate.
The expected rate uplift is 150 to 200 basis points above current FCNR(B) rates. Current rates are around 3.5 per cent to 5 per cent. The new range should be 5.5 per cent to 7 per cent. But individual banks set their own rates. As of today, no bank has announced a specific number. Watch the major banks over the next few weeks.
Key facts at a glance
| Detail | What you need to know |
|---|---|
| Interest rate (USD) | 5.5% to 7% per annum (banks decide; not yet announced) |
| Tax in India | Exempt for eligible NRI/OCI depositors |
| Deposit window | June 8 to September 30, 2026 |
| Tenor | 3 to 5 years |
| Lock-in | 1 year minimum; premature exit at bank discretion after that |
| Currency risk | None — principal and interest repaid in the deposited currency |
| Deposit insurance | DICGC covers up to Rs 5 lakh only — negligible for large deposits |
The fine print
The rate is not guaranteed by RBI. RBI creates the conditions; banks set the price. If you are comparing this against US Treasuries currently yielding around 4.5 per cent, you need an actual bank offer sheet before you can decide.
The lock-in is real. The minimum tenor is three years. You can exit after one year, but only if your bank permits it under its internal policy. More importantly, the swap RBI has done on its side cannot be cancelled. This is a three-to-five-year commitment in practice.
Deposit insurance is minimal. India's deposit guarantee scheme covers only Rs 5 lakh per depositor per bank. For a dollar deposit of any meaningful size, you are relying on the bank's credit, not a government backstop. Stick to large public sector banks or top-tier private banks if you proceed.
Repatriation is legally guaranteed under FEMA. Principal and interest can be freely repatriated. In practice, this works smoothly at SBI, HDFC Bank, ICICI Bank and Axis Bank. At smaller banks, documentation demands can slow things down. Choose your bank carefully.
Part of a larger move
The FCNR(B) scheme is one piece of a coordinated package announced between June 5 and 8. The government simultaneously exempted foreign institutional investors from all tax on government bond interest and capital gains. It expanded the range of bonds FPIs can buy under the Fully Accessible Route to include 15, 30, and 40-year tenors and Sovereign Green Bonds. It also opened equity investment to a broader class of non-resident individuals beyond NRIs and OCIs.
The FCNR(B) window addresses the immediate reserves crunch. It is time-limited and targets the NRI community. The bond and equity reforms are structural, aimed at making India a permanent destination for global institutional capital. Both are responses to the same problem: India needs more foreign currency, and it needs it to be stickier.
What should NRIs do now
Nothing immediately. The window is open until September 30. Wait for banks to announce their actual rates, which should happen within the next two to four weeks. Compare what is offered against your alternatives: US bank CDs, US Treasuries, and money market funds. The comparison should be on post-tax yield in your country of residence, not just the headline rate.
If the rate announced is 6.5 per cent or above, and you have dollar savings you do not need to access for three years, this is worth a serious look. If the rate lands at 5.5 per cent, the comparison with US Treasuries becomes less clear-cut. The math will only be possible once individual banks publish their numbers.
The RBI circular is numbered RBI/2026-27/99, dated June 8, 2026, issued by the Financial Markets Operations Department. The G-Sec tax change was promulgated as the Income-tax (Amendment) Ordinance, 2026 (No. 2 of 2026), deemed effective April 1, 2026.
Also read: FIIs flee, rupee at record low: India woos foreign money
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
