FCNR (B) Deposit Rates Hit 7.1% after RBI Opens Swap Window

The Reserve Bank of India announced a special USD-INR swap facility for fresh FCNR(B) deposits (Foreign Currency Non-Resident Bank deposits) on June 5, 2026, and opened it on June 8, 2026. By taking on the currency risk on the deposit principal, the RBI made it cheaper for banks to raise three to five year dollar deposits from NRIs.

That window has now closed. In an August 14, 2026 announcement, the RBI brought the last date for FCNR(B) deposits forward from September 30 to August 31, 2026. By then banks had raised about USD 133 billion in FCNR(B) deposits under the facility, according to RBI data. This article explains what the RBI offered, how the swap worked, how much it raised, and what US-based NRIs who opened a deposit during the window need to know about US tax and reporting.

What the RBI announced in June 2026

The RBI's circular of June 8, 2026 on the swap facility for FCNR(B) deposits allowed all Authorised Dealer Category-I banks to swap the dollars from fresh FCNR(B) deposits with the central bank. A companion circular did the same for external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs), and the RBI published FAQs on the facility.

Here is how it worked. A bank accepted USD from an NRI as an FCNR(B) deposit with a tenor of three to five years. It then sold those dollars to the RBI for rupees at the FBIL (Financial Benchmarks India Limited) reference rate. When the deposit matures, the trade reverses and the bank buys the same dollars back from the RBI at that same rate. Because both legs use one rate, this is a swap at par.

With the exchange rate fixed at both ends, the bank does not lose money on the principal if the rupee weakens over the life of the deposit. The RBI carries that risk instead. Without the facility, a bank that wants the same protection has to hedge in the market and pay for it, which limits the rate it can offer depositors. The swap covered only the principal, not the interest, and banks could use it once a week in multiples of USD one million.

How much the window raised

The RBI published running totals of the dollars banks mobilised under the facility. FCNR(B) deposits grew from about USD 36.7 billion by the end of July 2026 to about USD 133 billion by the time the window closed to FCNR(B) deposits on August 31, 2026.

Source: RBI press releases dated August 1, August 22, September 2 and September 21, 2026, based on figures reported by Authorised Dealer banks. The September 2 figures were provisional. The September 21 FCNR(B) figure covers deposits mobilised up to August 31, 2026.

Key terms of the scheme for FCNR(B) deposits:

• Eligible deposits were fresh FCNR(B) deposits, including deposits renewed on maturity, with a tenor of at least three years and at most five years.
• The June 8 circular covered deposits mobilised up to September 30, 2026. After the RBI's August 14, 2026 announcement, the facility stayed open for FCNR(B) deposits only until August 31, 2026, and it has now closed to new deposits.
• Deposits covered by the facility carry a one-year lock-in. After one year, banks may allow premature withdrawal at their discretion, under their internal policy.
• Swaps already done with the RBI cannot be cancelled.
• Banks could still offer regular three to five year FCNR(B) deposits outside the swap facility, without the one-year lock-in, keeping separate records for them.

How the swap window worked

The mechanics in plain language

A bank that takes in dollar deposits from NRIs faces a mismatch. It receives dollars, but most of its lending is in rupees, so it converts the dollars and puts them to work. When the deposit matures three or five years later, it has to repay dollars. If the rupee has weakened in the meantime, buying those dollars back costs more rupees than the bank planned for, and hedging that risk in the market has a cost of its own.

Under the 2026 window, the RBI stepped in as the counterparty. The bank sold dollars to the RBI and got rupees, and at maturity it buys those dollars back at the original rate. The currency risk on the principal sits with the RBI, not the bank, which is what gave banks room to pay depositors more on these deposits.

How 2026 compares to 2013

This was not the first time the RBI used this tool. In 2013 it ran a similar swap window for attracting FCNR(B) dollar funds. The 2026 facility was broader, covering ECBs and OFCBs as well as FCNR(B) deposits. By the RBI's own figures, FCNR(B) deposits made up USD 132,980 million of the USD 143,596 million in total inflows it reported as of September 18, 2026.

What it means for you as an NRI

If you opened a deposit during the window

An FCNR(B) deposit stays in the currency you open it in, so a USD deposit pays interest and returns principal in dollars, with no rupee conversion risk on your side. Your interest rate and maturity are the terms your bank confirmed when you opened the deposit. Our FCNR account guide covers how these deposits work in general.

This is what separates FCNR(B) from NRE fixed deposits, which are rupee deposits. If the rupee falls while you hold an NRE FD, your returns in dollars shrink. If you are weighing NRE vs NRO vs FCNR accounts, that currency protection is the main difference to weigh for long-term dollar savings.

The lock-in you need to plan for

Any deposit covered by the swap facility comes with a one-year lock-in from the date you opened it. After that, your bank may allow early withdrawal under its own policy, possibly with a penalty that varies by bank, so check your bank's terms before you break the deposit. These deposits also run for three to five years, so plan for the money to stay put for the full term unless you are prepared to pay that charge.

What US-based NRIs must know about US tax

FCNR(B) interest is exempt from Indian income tax for non-residents and for residents who are not ordinarily resident (RNOR). The US does not follow India's exemption. If you are a US tax resident, which includes US citizens, green card holders, and visa holders such as H-1B workers who meet the substantial presence test, the interest on your FCNR(B) deposit is taxable in the US.

Timing matters too. IRS Publication 550 says that for a CD or time deposit with a maturity of more than one year, you include part of the total interest in income each year under the original issue discount rules. So you generally cannot defer US tax on a three to five year FCNR(B) deposit until it matures. Because India taxes none of this interest, there is no Indian tax to claim as a foreign tax credit, and if your modified adjusted gross income is above $200,000 (single) or $250,000 (married filing jointly), the 3.8% Net Investment Income Tax can also apply. Our guide on whether an FCNR(B) deposit still makes sense after US tax works through the after-tax numbers, and our explainer on how Indian fixed deposits are taxed in the US covers the reporting mechanics.

You also have reporting obligations. The FBAR (FinCEN Form 114) is required if the combined value of your foreign financial accounts exceeded $10,000 at any time during the calendar year. It is filed electronically with FinCEN, not with your tax return, and is due April 15, with an automatic extension to October 15. Our guide to FBAR filing requirements for NRIs covers the full process.

Separately, FATCA Form 8938 applies to unmarried taxpayers living in the US whose specified foreign financial assets were worth more than $50,000 on the last day of the tax year or more than $75,000 at any time during the year. It is filed with your income tax return. FBAR and Form 8938 are separate filings, and you may need both.

A worked example: Rahul lives in New Jersey on an H-1B visa. During the window he moved $50,000 from a US high-yield savings account paying 4.8% into a five-year USD FCNR(B) deposit paying 6%. Both rates are illustrative. In the first year the FCNR(B) deposit earns $3,000, where the savings account would have earned $2,400. India does not tax the FCNR(B) interest, but the US taxes both amounts as ordinary income. At a 22% federal rate, Rahul keeps $2,340 from the FCNR(B) deposit, about 4.68%, against $1,872 from the savings account, about 3.74%. That is a gap of about $468 a year after federal tax, compared with $600 before tax. Any state income tax on the interest reduces both figures further, and the real comparison depends on what the savings account actually pays over the five years.

What you should do now

1. Do not expect swap-window terms on a new deposit. The window closed to FCNR(B) deposits on August 31, 2026. A deposit you open today is a regular FCNR(B) deposit, priced by your bank on its usual basis.
2. Check your bank's current FCNR(B) rate. Log in to your bank's NRI portal or call its NRI helpline to confirm the rate for your tenor before you open or renew a deposit. To see how rupee deposits compare, our NRE FD rate comparison puts major banks side by side.
3. Calculate your real after-tax return. Take the FCNR(B) rate your bank offers, subtract your US federal and any state income tax on the interest, allow for the Net Investment Income Tax if it applies to you, and compare the result with the after-tax return on your US savings or money market account.
4. If you opened a deposit during the window, note its lock-in date. The deposit cannot be withdrawn in its first year, and any withdrawal after that depends on your bank's premature withdrawal policy.
5. Include the account in your FBAR and, if required, Form 8938. If your combined foreign account balances already exceed $10,000, add the FCNR(B) account to your next FBAR. If this account takes you over the threshold for the first time, make sure you understand the filing requirement.
6. Talk to a cross-border financial advisor. The decision to move dollars to India involves your US tax situation, your India financial goals, and your liquidity needs over the next three to five years. An advisor who understands both US and India rules can run the numbers for your specific situation.

Conclusion

The RBI's 2026 swap facility for FCNR(B) deposits ran from June 8 to August 31, 2026. By taking the currency risk on the deposit principal, it let banks raise long-term dollar deposits more cheaply, and banks mobilised about USD 133 billion in FCNR(B) deposits before the window closed.

If you opened a deposit during the window, it keeps the terms your bank confirmed, subject to the one-year lock-in. If you are considering FCNR(B) now, you can still open a regular deposit, but confirm your bank's current rate first. Either way, US-based NRIs owe US tax on FCNR(B) interest each year, so run the after-tax numbers before committing.