FCNR RBI Guidelines 2026: Rules, Tenure, Tax Benefits And Latest Updates
Foreign Currency Non-Resident Bank deposits, or FCNR(B) deposits, serve a specific purpose for Indians living abroad. They allow non-resident Indians (NRIs) to hold money in a foreign currency with a bank in India, without converting it into INR at the time of deposit.
It means the depositor does not take the same currency risk that comes with a regular deposit. For an NRI earning in US dollars, pounds, euros or another freely convertible currency, this can make FCNR(B) deposits a practical way to keep funds linked to future overseas needs.
FCNR(B) deposits have also returned to the policy spotlight because of the Reserve Bank of India’s circular dated June 8, 2026. Circular RBI/2026-27/99 enabled Authorised Dealer Category-I banks to access a USD-INR forex swap facility linked to newly raised FCNR(B) deposits.1
Only new FCNR(B) deposits with a maturity range of 3-5 years are eligible under this facility. These deposits must be mobilised between June 8, 2026 and September 30, 2026, while the swap facility itself remains available up to October 16, 2026.
For depositors, the basic product does not change. FCNR(B) remains a foreign currency term deposit. But the FCNR latest update could shape how banks price and promote longer-tenure deposits during this window. That is why understanding the rules is useful now, not later.
FCNR RBI guidelines: Key Rules Explained
Before looking at returns or tax treatment, investors should first understand the operating frame. The RBI FCNR rules define who can open these deposits, which currencies banks can accept, and how long the money can remain parked.
Here are the main RBI NRI deposit guidelines:
FCNR deposit rules India | Details |
Eligible account holders | NRIs of Indian nationality or Indian origin. Overseas Corporate Bodies cannot open or maintain new FCNR(B) accounts, as this facility was withdrawn with effect from September 16, 2003. |
Permitted currencies | Any permitted currency. In this context, permitted currency means a freely convertible foreign currency. |
Deposit type | FCNR(B) deposits are term deposits. They are opened for a fixed period and cannot function like savings accounts. |
Recurring deposits | RBI does not allow RD under the FCNR(B) scheme. |
Minimum tenure | One year. |
Maximum tenure | Banks cannot accept or renew FCNR(B) deposits beyond 5 years. |
Deposit amount | RBI does not prescribe one common minimum or maximum deposit amount for every bank. Banks usually set their own minimum amount based on currency and product terms. |
Interest rate | Banks decide rates through board-approved policies, but they must follow RBI-prescribed ceilings. |
Source: RBI,2
Traditionally, FCNR(B) deposits were offered mainly in currencies such as USD, GBP, EUR, JPY, CAD and AUD. Foreign currency deposit rules later allowed banks to accept deposits in any permitted currency, provided it is freely convertible.
A currency may be permitted under the broad RBI framework, but a specific bank may not offer FCNR(B) deposits in that currency. Depositors should check this before transferring funds.
The interest rate framework also deserves attention. Since 1 March 2014, the cap for one-year to below-three-year FCNR(B) deposits has been LIBOR/Swap plus 200 basis points. For deposits of three years to five years, the ceiling is LIBOR or Swap plus 300 basis points.
This connects directly to the latest RBI swap facility. The interest ceiling remains in place. However, the facility may reduce hedging strain for banks on eligible three-year to five-year deposits, which is why longer tenures may draw more attention.
FCNR Deposit Tenure Rules
Tenure is where FCNR maturity rules become quite precise. RBI does not give banks unlimited leeway to design any maturity they want.
FCNR(B) deposits can be accepted only in the following maturity buckets:
- Greater or equal to 1 year and less than 2 years
- Greater or equal to 2 years and less than 3 years
- Greater or equal to 3 years and less than 4 years
- Greater or equal to 4 years and less than 5 years
- Equal to 5 years
So, a six-month FCNR(B) deposit is not allowed. A six-year FCNR(B) deposit is also outside the permitted framework. The product sits firmly within the one-year to five-year range.
FCNR(B) is not a recurring deposit. It is a term deposit. The depositor places a sum for a fixed period, and the bank pays interest based on the agreed currency, rate and tenure.
Interest calculation follows its own method. RBI says interest on FCNR(B) deposits should be calculated on the basis of 360 days to a year. It should be paid at intervals of 180 days each and then for the remaining actual number of days. Depositors can also choose to receive the interest at maturity with compounding.
This is useful when comparing FCNR(B) deposits with NRE fixed deposits. An NRE deposit is maintained in INR. FCNR(B), by contrast, remains in foreign currency. For someone who expects to use the funds abroad later, that difference is not cosmetic. It affects currency exposure.3
FCNR Withdrawal And Premature Closure Rules
FCNR(B) deposits are fixed-term products, but the money is not completely locked away in every situation. RBI permits premature withdrawal, subject to conditions set by banks and the broader regulatory framework.
The key FCNR withdrawal rules are as follows:
- Banks should permit premature withdrawal when the depositor requests it.
- Banks may levy a penalty as per their board-approved policy.
- If the deposit is withdrawn before completing the minimum period of one year, no interest is payable.
- Banks may levy a penalty to recover swap costs, where applicable.
- Penalty details should be communicated clearly when the deposit is accepted.
- Converting an FCNR(B) deposit into an NRE deposit, or an NRE deposit into an FCNR(B) deposit, before maturity is treated under premature withdrawal rules.
A higher advertised rate may not help if the depositor exits early and loses interest or pays a penalty. Liquidity should be checked before chasing tenure.
Renewal rules are another practical point. If an overdue FCNR(B) deposit is renewed within 14 days from maturity, the applicable interest is based on the lower of two rates: the rate on the maturity date or the rate on the date of renewal. If the overdue period is more than 14 days, the renewed deposit is generally treated as a fresh term deposit.4
If an NRI returns to India for permanent settlement, the bank may allow the existing FCNR(B) deposit to continue till maturity at the contracted rate. Once it matures, the funds can move into a Resident Rupee Deposit Account or a Resident Foreign Currency account, depending on eligibility and the depositor’s choice.
This gives some continuity to depositors whose residential status changes midway through the deposit.
FCNR Tax And Repatriation Rules
Tax and repatriation often decide whether an FCNR(B) deposit is useful for an NRI. The headline rate is only one part of the story. What remains after tax, and how easily the money can move abroad, matters just as much.
Under Section 10(15)(iv)(fa) of the Income-tax Act, interest payable by a scheduled bank on approved foreign currency deposits is exempt for non-residents. The exemption also applies to individuals or Hindu Undivided Families that are resident but not ordinarily resident, subject to the relevant conditions.5,6
In simple terms, interest on an eligible FCNR(B) deposit is not taxed in India while the depositor meets the required status and conditions. However, this does not automatically settle the tax position in the country where the NRI lives. Local tax rules may still apply.
Repatriation is another important feature. RBI permits the repatriation of both principal and interest from FCNR(B) deposits in foreign currency, subject to normal banking checks and compliance requirements.
This is where FCNR(B) differs from many INR-based products. A depositor who earns in US dollars and expects future expenses in US dollars may prefer to avoid unnecessary currency conversion. FCNR(B) helps maintain that currency link.
Even so, the product still needs scrutiny. Depositors should compare the rate, currency, tenure, withdrawal penalty and tax treatment before opening the account.
Latest FCNR Updates Investors Should Track
The latest FCNR regulations update is not a new FCNR(B) scheme for depositors. It is a support facility for banks. But it could still influence the deposit market because banks may become more active in mobilising eligible longer-tenure FCNR(B) deposits.
Under its new circular, the RBI introduced a USD/INR swap facility for fresh FCNR(B) deposits raised for three- to five-year maturities. Banks may mobilise these deposits in any freely convertible currency, including deposits renewed when they mature. However, the RBI swap leg will be available only in USD.
The key details are specific:
- Eligible deposits must have a minimum tenor of three years and a maximum tenor of five years.
- Deposits must be mobilised between June 8, 2026 and September 30, 2026.
- The swap facility will remain open up to October 16, 2026.
- The underlying deposits will have a lock-in period of one year.
- Premature withdrawal after one year may be allowed, based on the bank’s policy.
- Swaps undertaken with RBI cannot be cancelled.
- Banks can access the facility once a week.
- The swap transaction will be in multiples of USD 1 million.
- The first leg will use the FBIL reference rate and settle on a spot basis.
- The second leg of the swap will be settled at the first-leg rate, making the transaction a par swap.
Three year to five-year FCNR(B) deposits may receive more attention from banks during this window. Some banks may communicate these products more actively or adjust their pricing within RBI’s permitted ceiling.
That does not mean every FCNR(B) deposit will suit every NRI. The right choice still depends on currency needs, liquidity, tax status and the likelihood of using the funds abroad. The latest RBI move makes FCNR(B) deposits timely. The investor still needs to read the terms carefully.
Conclusion
For NRIs seeking a balance between capital preservation, foreign currency protection, and predictable returns, FCNR deposits remain a compelling investment option. They offer the advantage of earning interest in foreign currency while reducing exposure to exchange-rate fluctuations, making them a practical choice for parking overseas earnings.
However, every financial goal is different. While FCNR deposits can provide stability and liquidity, investors may also want to explore opportunities that align with their return expectations, investment horizon, and risk appetite.
At Grip Invest, we believe informed decisions lead to better outcomes. Whether you're evaluating FCNR deposits or comparing them with other fixed-income investment options, understanding the trade-offs can help you build a portfolio that works harder for your financial future.
Grip offers corporate bonds and other fixed-income investment options with yields up to 12.5% and institutional-grade security features. Visit Grip Today!
FAQs On FCNR RBI Guidelines
 |
Author: Grip Invest Editorial Team The Grip Invest Editorial Team is a group of Chartered Accountants, MBA (Finance) graduates, and Qualified Research Analysts dedicated to helping you invest smarter. We dive deep into India's fixed income landscape to deliver content that is accurate, up-to-date, and easy to understand. Whether you're exploring bonds, fixed deposits, or other fixed income opportunities, our guides cut through the noise and give you the clarity to make better financial decisions. |
Want to stay at the top of your finances?
Join the community of 4 lakh+ investors and learn more about Grip Invest, the latest financial knick-knacks, and shenanigans in the world of investing.
Happy Investing!
Disclaimer - Investments in debt securities/municipal debt securities/securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully. The investor is requested to take into consideration all the risk factors before the commencement of trading.
This communication is prepared by Grip Broking Private Limited (bearing SEBI Registration No. INZ000312836 and NSE ID 90319) and/or its affiliate/ group company(ies) (together referred to as “Grip”) and the contents of this disclaimer are applicable to this document and any and all written or oral communication(s) made by Grip or its directors, employees, associates, representatives and agents. This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip does not guarantee or assure any return on investments and accepts no liability for consequences of any actions taken based on the information provided. For more details, please visit www.gripinvest.in
Registered Address - 106, II F, New Asiatic Building, H Block, Connaught Place, New Delhi 110001
