RBI and Finance Ministry engage with UAE authorities after new rules disrupt efforts to attract NRI foreign-currency deposits
Indian authorities are engaging with regulators in the United Arab Emirates after new restrictions imposed by the UAE Central Bank affected Indian banks’ efforts to mobilise Foreign Currency Non-Resident (Bank), or FCNR(B), deposits from the large Indian expatriate community.
The move comes at a time when the Reserve Bank of India (RBI) is encouraging banks to raise foreign-currency deposits from non-resident Indians (NRIs) to strengthen the country’s foreign exchange reserves and improve dollar liquidity. The special FCNR(B) mobilisation scheme, introduced in June and valid until September 2026, allows banks to offer more attractive returns on eligible deposits.
However, recent guidance from the UAE Central Bank has limited the activities of representative offices of foreign banks. The new rules prevent these offices from undertaking functions such as facilitating documentation, marketing deposit products or cross-selling banking services, creating operational challenges for Indian lenders that rely heavily on representative offices rather than full banking branches in the UAE.
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According to industry sources, the RBI and the Ministry of Finance have taken up the matter with UAE authorities to explore a regulatory solution
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Discussions are focused on ensuring that Indian banks can continue serving NRI customers while remaining compliant with the UAE’s banking regulations
The UAE is one of the largest overseas markets for Indian banks seeking FCNR(B) deposits because of its sizeable Indian diaspora and significant remittance flows. Bankers believe any prolonged disruption could affect the pace of foreign-currency deposit mobilisation under the RBI’s temporary scheme.
Despite the regulatory hurdle, banks remain optimistic that a mutually acceptable framework can be worked out. Industry executives say customer interest in FCNR(B) deposits remains strong, supported by competitive interest rates and the RBI’s measures to reduce banks’ currency hedging costs.
