RBI allows banks to offer higher interest rates to NRIs/PIOs to mobilise forex

The Reserve Bank of India (RBI), on a review of it’s 2025 direction, has decided to temporarily withdraw interest rate ceiling on fresh Foreign Currently Non-Resident- Bank [FCNR(B)] deposits of 3-5 year tenors and restriction on interest rates on Non-Resident External (NRE) deposits of three year and above tenors, including the deposits that are renewed upon maturity, till September 30, 2026 to boost forex reserves. 

To this effect the central bank has issued Amendment Directions on Wednesday (June 17, 2026). As per this direction banks will be able to offer higher interest rates to this specific category of depositors. 

As per the directions interest rates on NRE/NRO deposits will not be higher than those offered by the bank on comparable domestic rupee term deposits.

For a tenure of one year to less than three years the Overnight Alternative Reference Rate for the respective currency/ Swap would be plus 250 basis points.

For three years and above upto and including five years the Overnight Alternative Reference Rate for the respective currency/ Swap would be plus 350 basis points.

Any transfer from NRO accounts to NRE accounts shall not qualify for such exemption.

This move will help Non Resident Indians (NRIs) and People of Indian Origin (PIOs) to avail higher interest rates from India banks to park their funds.

On the other hand, it will help India to mobilise dollars to swell it’s foreign exchange reserves that may lend support to a depreciating rupee and help meet balance of payment obligations.