Overview
- On June 18 the Reserve Bank of India temporarily removed interest‑rate caps on fresh NRE deposits of three years or more and on FCNR(B) deposits with tenors of three to five years, with the relaxation running until September 30, 2026.
- The RBI also said it will bear the full hedging cost for eligible fresh FCNR(B) deposits through a special forex swap facility to lower banks’ currency‑risk costs and make dollar inflows cheaper to mobilise.
- Banks quickly responded by raising US dollar FCNR(B) and long‑tenor NRE rates into the roughly 6%–7% range and above in some cases, with Bandhan Bank offering 7.1% for $1 million-plus deposits and Ujjivan quoting about 7.13%.
- The sudden rate competition has prompted some lenders to reconsider earlier product announcements because higher offers could trigger customer churn from rival banks and squeeze margins on existing books.
- The move is meant to rebuild foreign exchange buffers seen as vulnerable to global volatility, mirrors special FCNR(B) steps used in 2013, and excludes transfers from NRO to NRE accounts while market participants expect further rate moves and sizable dollar mobilisation.