(INDIA) – The Reserve Bank of India opened a special window to encourage foreign-currency inflows, prompting banks to raise rates on fresh FCNR(B) deposits and pushing some US dollar offers to 7.10% a year.

The support applies to banks’ hedging costs on eligible fresh FCNR(B) deposits with maturities between three years and five years, and the window runs until September 30, 2026. Banks have responded by lifting rates mainly in those longer tenure buckets.

That has drawn renewed attention from NRIs who want fixed returns in dollars, protection from rupee exchange-rate swings and the option to move both principal and interest overseas after maturity. U.S.-based depositors also face a separate tax question, because interest that is generally exempt in India may still be taxable and reportable in the United States.

FCNR(B) stands for Foreign Currency Non-Resident Bank deposit. Indian banks offer these fixed deposits to eligible NRIs, Overseas Citizens of India and Persons of Indian Origin in foreign currencies including the US dollar, pound sterling, euro, Japanese yen, Australian dollar and Canadian dollar.

Unlike NRE or NRO fixed deposits, FCNR(B) deposits are maintained in foreign currency rather than Indian rupees. Principal and interest are payable in that same currency, which shields the depositor from rupee depreciation against the currency in which the deposit is held.

Eligibility turns on Indian banking and residency rules, not on a depositor’s immigration label abroad. An Indian citizen working in the United States on H-1B status will generally be treated as an NRI for Indian banking purposes if he is residing outside India for employment, while that same person may still be a U.S. tax resident under U.S. rules.

The products usually run from a minimum tenure of one year to a maximum of five years. Principal and interest are fully repatriable, meaning the proceeds can be sent abroad after maturity, subject to normal banking, KYC and FEMA procedures, without first being converted into rupees.

That repatriability remains one of the main selling points. If an NRI places USD 50,000 in an FCNR(B) deposit and the amount grows to USD 55,000, the depositor can send the full USD 55,000 overseas after maturity, covering both the original principal and the interest earned.

Banks have concentrated the richest rates where the RBI window gives them relief on hedging costs. Longer-tenure USD FCNR(B) deposits now stand well above short-tenure rates at several lenders, a shift that has sharpened comparisons across banks.

AU Small Finance Bank, effective June 10, 2026, offers 7.10% for deposits from three years to less than four years for both USD below $500,000 and USD $500,000 and above. It offers 7.00% from four years to less than five years and 7.00% for five years.

HDFC Bank, effective June 2026, offers 6.00% for three years to less than four years, 6.00% for four years to less than five years and 6.00% for five years only. Its shorter tenures are lower, at 3.95% for one year to less than two years and 3.60% for two years to less than three years.

ICICI Bank, effective June 11, 2026, also offers 6.00% for 36 months to less than 48 months, 48 months to less than 60 months and 60 months. Central Bank of India, effective June 10, 2026, offers 6.00% across the three-year to five-year range as well.

Punjab National Bank, effective June 11, 2026, offers 6.00% for three years to less than four years, 6.05% for four years to less than five years and 6.10% for five years. South Indian Bank, effective June 11, 2026, offers 6.50% for three years to less than four years, then 6.00% for four years to less than five years and 5.50% for five years.

Axis Bank, also effective June 11, 2026, offers 6.00% for three years to less than four years, four years to less than five years and five years, for both USD below $1 million and USD $1 million and above. Kotak Mahindra Bank, effective June 11, 2026, offers 6.00% in those tenure bands for deposits below $1 million and 6.15% for USD $1 million and above.

Among the banks reviewed, AU Small Finance Bank carries the highest published USD FCNR(B) rate at 7.10% for the three-year to less than four-year slot. South Indian Bank follows at 6.50%, while Kotak Mahindra Bank goes to 6.15% for deposits of USD 1 million and above.

Minimum deposit size is not uniform across the system. Each bank sets its own threshold, and those thresholds can differ by currency, deposit channel, customer category or branch procedure.

HDFC Bank lists USD 1,000 as the minimum initial deposit amount for USD FCNR deposits. Banks can also set different rules for special rates, including slabs above USD 500,000 or USD 1 million.

That leaves depositors with several checks before remitting funds: the minimum amount, whether the quoted rate matches the intended deposit size, whether online booking is available and whether the bank accepts direct overseas remittance. Rates can change quickly, so bank-specific terms matter as much as the headline number.

NRIs in the United States can usually approach Indian banks through NRI banking desks, online application channels, internet banking, mobile apps or relationship managers. Some banks also allow family members or authorised representatives to work through an Indian branch, if the bank permits that route.

One sample message depositors can send to avoid confusion with a rupee fixed deposit is: “I am an NRI residing in the USA. I want to open a USD FCNR(B) deposit under the current three-year to five-year FCNR(B) rate window. Please confirm the applicable USD interest rate, minimum deposit amount, tenure options, premature withdrawal rules, lock-in conditions and the exact wire transfer instructions for remitting USD from my US bank account without conversion into INR.”

Funding usually happens in one of two ways. A depositor can remit dollars to an existing NRE account and then book the FCNR(B) deposit through the bank, or send USD directly from a U.S. bank account if the Indian bank accepts direct foreign-currency remittance for that purpose.

Direct remittance requires care. If the dollars are converted into Indian rupees during transfer, the bank may credit the funds into an NRE account and place them in an NRE fixed deposit rather than a USD FCNR(B) deposit.

A second sample instruction aimed at preventing that outcome is: “Please provide the correct USD wire instructions for opening a USD FCNR(B) deposit so that the funds remain in USD and are not converted into INR.” That point matters because normal money-transfer apps and remittance services may automatically convert USD into INR.

Documentation can include a passport copy, visa, green card, work permit or OCI card, overseas address proof, Indian address proof if available, PAN or Form 60, a recent photograph, FATCA and CRS declaration, account opening form, specimen signature and nominee details. Customers with an active NRE or NRO account and completed KYC may be able to book an FCNR(B) deposit through internet banking or written instructions.

At maturity, the depositor can usually renew the deposit, transfer the proceeds to an eligible NRE account, remit principal and interest back to the United States or place the funds in another permitted foreign-currency or NRI deposit product. Because the deposit remains in foreign currency, the proceeds do not need to pass through rupees before moving abroad.

Tax treatment in India is one reason these products attract NRIs. Interest earned on FCNR(B) deposits is generally exempt from income tax in India for eligible NRIs and persons who are resident but not ordinarily resident.

That exemption stops at India’s border. A U.S. tax resident, including a U.S. citizen, green card holder or resident alien under U.S. tax rules, generally must report FCNR(B) interest in the United States as worldwide income, even if India does not tax it.

Foreign account reporting can also come into play. FBAR may apply if the aggregate value of foreign financial accounts exceeds USD 10,000 at any time during the calendar year, and Form 8938 may also apply if specified foreign financial assets exceed the applicable IRS threshold.

A simple example illustrates the point: an NRI in the United States who deposits USD 50,000 and earns USD 3,000 in interest may owe no tax in India on that interest, but may still have to report the USD 3,000 in the United States. In the same way, a deposit yielding 7.10% does not translate into a tax-free global return.

What remains attractive is the combination of dollar-denominated returns, India-side tax exemption and full repatriation. A depositor keeps exposure to Indian banking channels without taking rupee currency risk, and some longer-tenure rates compare favourably with comparable dollar deposits elsewhere.

Premature withdrawal rules still deserve attention. In many cases, no interest may be payable if an FCNR(B) deposit is closed before completing one year, and depositors also need to check whether any bank has lock-in conditions tied to the current window.

With the RBI support window in place until September 30, 2026, the opportunity has a clear time frame. NRIs weighing FCNR(B) deposits against other fixed-income options now face a market where the spread between banks is wide, the top published USD rate stands at 7.10%, and the fine print on taxes, remittance and early exit can shape the return as much as the headline number.