The Reserve Bank of India (RBI) has announced a significant, albeit temporary, relaxation of interest rate ceilings on specific foreign currency deposits. This move, which took effect immediately on June 17, 2026, will remain in force until September 30, 2026, providing banks with enhanced flexibility to attract overseas funds.
Temporary Relaxation for Key NRI Deposits
Under the new directives, the RBI has withdrawn the interest rate ceiling on fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits with maturities ranging from three to five years. Additionally, restrictions on interest rates for Non-Resident External (NRE) deposits with tenors of three years and above have also been removed.
This temporary withdrawal of interest rate caps applies to both new deposits mobilized by banks and those renewed upon maturity. The central bank's amendment directions are designed to streamline the process for financial institutions to secure foreign currency.
Boosting Foreign Currency Inflows
The primary objective behind the RBI's decision is to augment foreign currency inflows into India. By removing these interest rate restrictions, the central bank aims to make these deposit schemes more attractive to Non-Resident Indians (NRIs), encouraging them to channel their savings into Indian banks.
This measure is expected to empower banks with greater autonomy to set competitive interest rates, thereby increasing their ability to draw in a larger volume of overseas deposits. The flexibility is anticipated to foster a more dynamic environment for foreign currency mobilization, contributing to the nation's financial stability and growth.