Indian Banks hiked FCNR deposit rates unprecedentedly

FCNR deposit rates: Banks in India have hiked FCNR interest rates significantly i.e. up to 4.52% p.a. after the Reserve Bank of India removed the cap on interest rates on foreign currency non-resident bank (FCNR(B)) account, and non-resident external (NRE) account deposits. As a result, FCNR deposits have become a very attractive investment option for NRIs vis-à-vis term deposits in other countries. NRIs can park their savings in these valued fixed deposits to earn attractive returns.  

For example, the annual percentage yield (APY) of CDs (certificates of deposits) – the US equivalent of Indian fixed deposits – of the top five banks including JP Morgan Chase, Wells Fargo, Bank of America, Wells Fargo and U.S. Bancorp, currency remains around 0.02%-1.01% for 3-year deposits. CDs with 12 months maturity period offer rates at 0.02%-0.10%. 

Whereas USD-denominated FCNR(B) deposits locked till 4 November with 12-month and 36-month maturity will give a yield of 2.5-4% and 2.88-3.8%, respectively. 

Indian Banks hiked FCNR deposit rates unprecedentedly
Indian Banks hiked FCNR deposit rates significantly

How FCNR deposit rates compare to term deposits rates in US

USD-denominated FCNR deposit rates   

Listed below are the revised rates for FCNR deposits below Rs. 2 cr made in USD, effective from July, 2022:

TenureSBMRBL BankICICI Bank HDFC BankSBIKotak
1 to less than 2 years4.02%4%2.5%3.35%2.85%3.25%
2 to less than 3 years4.02%3.8%2.5%3.35%3.00%3%
3 to less than 4 years4.02%3.33%2.5%2.7%3.10%2.75%
4 to less than 5 years3.02%3%2.5%2.6%3.15%2.5%
5 years4.52%3%2.5%2.2%3.25%2.5%
Revised interest rates for USD-denominated FCNR deposits

Term deposit rates in US

Listed below are rates for certificate of deposits (CDs) – US equivalent of FDs in India – by top 5 banks:

TenureJP Morgan ChaseWells FargoBank of AmericaCitibankU.S. Bancorp
1 year0.02%0.01%0.03%0.1%0.05%
3 years0.02%NA0.03%1.01%0.1%
5 years0.02%NA0.03%1.01%0.25%
Interest rates on CDs

Why should NRI invest in FCNR deposits now

Rate hikes on FCNR (B) deposits make them far more attractive as compared to term deposits in other countries. The revised rates locked from July to October on new deposits will be applicable for the entire tenure. Moreover, interest earned from NRE and FCNR deposits are tax free in India.   

However, premature withdrawal of these deposits will incur a penalty of 0.25 – 1.0% and no interest will be paid if deposits are withdrawn before one year.

Why FCNR deposit rates were hiked

In response to RBI’s move to enhance forex inflows, including elimination of ceiling on interest rates on incremental FCNR (B) and NRE deposits and exemption from maintenance of reserve ratios on fresh deposits, banks have increased rates on FCNR(B) deposits. 

In other words, banks are not required to maintain CRR and SLR on incremental NRE and FCNR(B) bank deposits till 31 October. Banks are supposed to pass on the benefit to customers by way of higher interest rates.  

SBNRI is an online one-stop platform for expert services and advisory on all major NRI specific aspects including NRI FD schemes.

To get end to end assistance with booking of FCNR(B) Fixed Deposits, you can connect with our expert using the button at the end of the article. You can also browse through the NRI Account Opening grid that we have prepared specially for NRIs and get expert advisory and assistance seamlessly and complete the entire process at the comfort of your homes. Also, visit our blog and YouTube Channel for more details.

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