Where this post comes from: My notes from reading news reports on the RBI’s special FCNR deposit scheme, formally FCNR(B), checked against other reports and bank pages. We did not read the RBI’s own circulars directly.
Lately, the FCNR deposit keeps showing up in business news. It sounds heavy, but the idea is simple. Let’s go step by step.
What is an FCNR deposit, or FCNR account?
FCNR stands for Foreign Currency Non-Resident (Bank) account. It is a fixed deposit that only Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) can open in an Indian bank.
The main difference from a normal NRI account is the currency. A normal account turns your money into rupees. An FCNR deposit stays in a foreign currency, such as US dollars.
This gives the depositor three benefits:
No rupee worry. Your money and interest stay in dollars. If the rupee weakens, you lose nothing.
Tax-free interest in India. As long as you keep your NRI status.
Easy to take back. The full deposit and interest can be sent to your country of residence.
Why is the RBI talking about it?
Think of a country like a household. It needs a steady supply of foreign money, mainly dollars, to pay for things like imported oil. When dollars flow out, the rupee tends to weaken.
Earlier this year, foreign investors pulled a large amount of money out of Indian markets. Global tensions and costlier energy added to the worry. So the Reserve Bank of India (RBI), the country’s central bank, looked for another source of dollars: Indians living abroad.
What did the RBI do?
On June 8, 2026, the RBI opened a special window for FCNR deposits of 3 to 5 years. It made the deal attractive for banks in two ways:
It took away the currency risk. Banks could hand their dollars to the RBI and get rupees for lending. The RBI arranged for the dollars to be returned later, so banks did not carry the risk of exchange rate swings. Because of this, banks could offer NRIs better interest.
It let banks lend more. Banks normally have to keep a part of every deposit aside instead of lending it. For these deposits, that rule was waived.
How much came in?
The window was meant to run until September 30. Because the response was so strong, it closed on August 31, a month early.
Banks collected about $133 billion through FCNR deposits. Counting some other foreign borrowing as well, the total was about $143.5 billion as of September 18.
You may see the word “mobilisation” in news reports. It just means collecting deposits.
What will banks do with the money?
RBI Deputy Governor Rohit Jain said on September 24, 2026, at the SBI Banking & Economics Conclave in Mumbai, that banks are expected to “deploy” this money over the next few months. To deploy simply means to put it to work, mostly by giving out loans.
Here is what he said:
Loans for the festive season. Demand for loans is strong across many sectors, and the festive season should add to it.
Replacing costly deposits. Most banks said they would first use the new money to replace older deposits on which they pay higher interest. That lowers their costs.
Banks decide. The RBI is not pushing banks toward any sector. Each bank decides on its own, and the RBI expects banks to stay careful about who they lend to.
In short
For NRIs, it was a chance to earn good dollar interest. For India, it means more dollars, which supports the rupee. For banks, it means more money to lend.
This article is for information only and is not investment or tax advice. Figures and rules can change, and any mistakes in summarising are mine.
Key takeaways
- What FCNR is: FCNR(B) is a fixed deposit that only NRIs and OCIs can open in an Indian bank, and it stays in a foreign currency such as US dollars. Interest is tax-free in India as long as you keep your NRI status, and the full deposit and interest can be sent back to your country of residence.
- What the RBI did: On 8 June 2026, the RBI opened a special window for FCNR deposits of 3 to 5 years, removing the currency risk for banks and waiving the usual rule on keeping part of each deposit aside. It closed on 31 August, a month early, after banks collected about $133 billion through FCNR deposits.
- What happens next: RBI Deputy Governor Rohit Jain said on 24 September 2026 that banks are expected to deploy the money over the next few months. Most banks said they would first replace older, costlier deposits, and each bank decides where to lend.
Frequently asked questions
FCNR stands for Foreign Currency Non-Resident (Bank) account. It is a fixed deposit that only Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) can open in an Indian bank. A normal NRI account turns your money into rupees, but an FCNR deposit stays in a foreign currency, such as US dollars.
The article lists three. There is no rupee worry, because your money and interest stay in dollars. The interest is tax-free in India as long as you keep your NRI status. And it is easy to take back, because the full deposit and interest can be sent to your country of residence.
A country needs a steady supply of foreign money, mainly dollars, to pay for things like imported oil, and when dollars flow out the rupee tends to weaken. Earlier this year, foreign investors pulled a large amount of money out of Indian markets, so the RBI looked to Indians living abroad as another source of dollars. More dollars support the rupee.
Opened on 8 June 2026 for FCNR deposits of 3 to 5 years, it let banks hand their dollars to the RBI and get rupees for lending, with the RBI arranging for the dollars to be returned later. Banks therefore did not carry the risk of exchange rate swings and could offer NRIs better interest. The rule that makes banks keep part of every deposit aside was also waived for these deposits.
Banks collected about $133 billion through FCNR deposits, and about $143.5 billion counting some other foreign borrowing, as of 18 September. The window was meant to run until 30 September but closed on 31 August because the response was so strong. Banks are expected to deploy the money over the next few months, mostly by giving out loans.
Sources
Main sources
Business Standard: RBI swap window draws $143.5 billion; FCNR(B) deposits at $133 billion
Business Standard: Banks should deploy FCNR(B) funds in coming months: RBI DG Rohit Jain
Business Standard: FCNR(B) swap window explained
Other sources
Economic Times BFSI: Banks to deploy USD 133 bn FCNR(B) liquidity
ThePrint: Banks likely to deploy excess liquidity
Business Standard: RBI opens FCNR(B) swap window
CorpLawUpdates: RBI CRR and SLR exemption on fresh FCNR(B) deposits
ICICI Bank: FCNR(B) FAQs
I used Claude, an AI assistant, to rephrase my notes to make it reader friendly.