Punjab National Bank (PNB) has announced a substantial increase in interest rates for its Foreign Currency Non-Resident (Bank), or FCNR(B), dollar deposits, now offering up to 6.1% per annum. This move is aimed at attracting foreign currency funds from Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Persons of Indian Origin (POIs).
The revised rates, effective June 11, 2026, position PNB competitively in the market, following a broader trend among Indian banks to enhance returns on foreign currency deposits. This surge in rates comes after the Reserve Bank of India (RBI) decided to provide government support for hedging costs on new FCNR(B) deposits with tenures of three to five years, valid until September 30, 2026.
PNB's New FCNR(B) Dollar Deposit Structure
Under the updated structure, PNB offers varying rates based on deposit tenure:
- Three years to less than four years: 6% interest
- Four years to less than five years: 6.05% interest
- Five years: 6.1% interest
These new rates represent a significant jump from PNB's previous offerings, which were considerably lower (e.g., 3.24% for three-to-four-year deposits). For deposits exceeding $1 million, PNB may offer preferential rates determined through negotiation.
Understanding FCNR(B) Accounts
An FCNR(B) account allows NRIs, OCIs, and POIs to hold fixed deposits in various designated foreign currencies, including the US dollar, British pound, euro, Australian dollar, Canadian dollar, and Japanese yen. These accounts are a popular choice for overseas Indians due to several benefits:
- Tax-free interest income
- Easy repatriation of funds
- Protection against exchange rate fluctuations
They enable NRIs to earn returns in India without being exposed to currency conversion risks.
Other Banks Raising Rates to Attract Foreign Inflows
PNB's rate hike is part of a wider effort by Indian lenders to secure stable foreign currency inflows. Several other banks have also adjusted their FCNR(B) rates:
- Axis Bank: Now offers 6% on dollar deposits for three- to five-year tenures, applicable to both deposits below and above $1 million.
- ICICI Bank: Provides 6% on deposits with maturities ranging from 36 to 60 months.
- Equitas Small Finance Bank: Stands out with a rate of 7.13% on dollar deposits for tenures between 36 and 60 months, for deposits both below and above $500,000.
- AU Small Finance Bank: Increased rates to 7.1% for deposits spanning three years to less than four years, and 7% for four- and five-year categories.
Why Banks Are Boosting FCNR Rates
Bankers indicate that these upward revisions in FCNR(B) rates are strategic, aimed at strengthening funding stability and attracting more foreign currency deposits from NRIs. The RBI's decision to cover hedging costs for new three- to five-year FCNR(B) deposits has further incentivized banks to offer more competitive returns. This creates a favorable environment for NRIs seeking to lock in attractive long-term rates on dollar-denominated savings, with rates now generally ranging between 6% and 7% across various lenders.