Punjab National Bank has revised FCNR(B) deposit rates for 3, 4, and 5 years. The FCNR(B) deposit rate will be 6% for deposits of up to $1 million for a three-year tenure. For deposits for 3 to 4 years, the rate will be 6.05%, and it will be 6.10% on deposits for 4 to 5 years, reports ANI. Since June 1, the rates were 3.24% for deposits that were for 3 years and less than 4 years.
Speaking to ANI, Punjab National Bank, MD and CEO, Ashok Chandra said, “It will be a very attractive rate because globally, if you see even the US treasury rate, it is somewhere around 4.25%. So, for the investor and for the NRIs, I think India becomes a very good destination to invest in now. We are expecting to mobilise around 2.5 billion USD.”
With US yields at 4.25%- 4.5% for three years, NRIs parking funds in Punjab National Bank’s FCNR(B) deposits can earn an additional of around 2%, with no currency risk and no Indian income tax on interest.
Earlier, HDFC Bank revised the FCNR (B) rates by offering 6% on dollar deposits of NRIs. AU Small Finance Bank has also increased FCNR deposit rates from 5.15% to 7.10% per annum on 3-year but less than 4-year deposits. For 4 years and above, the rate is set at 7%.
What is the RBI Swap Facility on FCNR deposits?
A US Dollar-Rupee Forex Swap Facility for newly raised FCNR(B) deposits by banks was announced by the RBI in May. Banks may raise NRI deposits with a minimum tenor of three years and a maximum tenor of five years under this arrangement. Deposits are subject to a one-year lock-in period, and the program is effective until September 30, 2026.
This measure effectively eliminates currency risk for banks. The RBI provides currency risk insurance to banks by enabling them to exchange NRI foreign deposits for rupees at the current rate and then requiring them to repurchase the same amount at a predetermined rate upon maturity, implying that any rupee depreciation in the meantime is absorbed by the RBI rather than the bank.
In essence, RBI is helping banks manage currency risks caused by the rapid depreciation of the INR, enabling them to attract NRI dollar deposits through higher interest rates on FCNR(B) deposits and bring essential foreign exchange into India.
What are FCNR(B) deposits?
FCNR(B) deposits are different from NRE or NRO accounts in that they are held in foreign currency. This means the deposit amount and interest are both denominated in the foreign currency — protecting NRIs from rupee depreciation. The proceeds can be fully repatriated, and interest earned is not subject to income tax in India. Interest is payable either semi-annually or at maturity in the deposit currency. FCNR accounts may be jointly held by NRIs or with resident close relatives, and they come with a nomination facility.
Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice. Data and estimates cited are sourced from publicly available reports and statements. Interest rates and scheme terms are subject to change as per RBI guidelines. For rates, visit the bank’s website, as rates can change without notice. Readers are advised to consult a qualified financial advisor before making any investment decisions.