NRIs to benefit from higher returns on savings in India following RBI’s FCNR (B) interest rate revision
The Reserve Bank of India (RBI) has delivered a significant boost to Non-Resident Indians (NRIs) by revising interest rate ceilings for Foreign Currency Non-Resident Bank (FCNR-B) deposits.
Announced during its fifth bi-monthly monetary policy meeting of the financial year on December 6, 2024, the change is set to enhance earnings for NRIs holding foreign currency accounts in India.
RBI Governor Shaktikanta Das revealed the decision, explaining that the revision applies to FCNR (B) deposits based on their maturity tenors. These accounts allow NRIs to store their foreign earnings in currencies like the US Dollar (USD) or British Pound (GBP), protecting them from exchange rate volatility.
Previously, interest rates for FCNR (B) deposits were capped at the Overnight Alternative Reference Rate (ARR) for the respective currency, plus 250 basis points (bps) for deposits maturing between one and three years, and ARR plus 350 bps for deposits maturing between three and five years.
Under the new policy, banks can offer higher interest rates:
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For deposits of 1 to less than 3 years: ARR plus 400 bps.
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For deposits of 3 to 5 years: ARR plus 500 bps.
This relaxation is effective immediately and will remain in place until March 31, 2025.
The move aims to attract more foreign currency inflows, strengthen India’s foreign reserves, and offer competitive savings options to NRIs amid global economic uncertainties. With these revised rates, NRIs stand to gain more from their savings, making FCNR (B) deposits an attractive option for stable, high-yield investments.
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