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Indian banks have sharply reduced long-tenure FCNR(

ICICIdirect Research 02 Sep 2026 DISCLAIMER

News: As per media sources, Indian banks have sharply reduced long-tenure FCNR(B) deposit rates following the closure of RBI’s special swap window on August 31, unwinding the premium rates offered during the scheme. HDFC Bank cut its five-year US dollar FCNR(B) rate by 310 bps to 3.15% from 6.25%, while SBI’s regular five-year rate is now 3.05% compared with 5.75-6.0% offered under its special scheme. Banks had raised 3–5-year FCNR(B) rates after RBI introduced the concessional dollar-rupee swap facility on June 8, which lowered the effective cost of foreign-currency funding. Banks mobilised $65.4 billion through FCNR(B) deposits as of August 21, while overall inflows under RBI’s foreign-currency facilities reached ~$73 billion, prompting RBI to advance the FCNR(B) window closure to August 31.

View: The sharp rollback in FCNR(B) rates reflects normalisation of deposit pricing following withdrawal of the concessional swap economics, with banks no longer incentivised to aggressively mobilise long-tenure foreign-currency deposits. The sizeable mobilisation during the window has already provided near-term liquidity and funding flexibility, while enabling banks to reduce dependence on relatively expensive domestic bulk deposits. However, incremental FCNR(B) mobilisation should moderate from here, with domestic deposit mobilisation and deployment of the accumulated liquidity into credit growth remaining key monitorables.

Impact: Neutral

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