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The RBI has temporarily removed the interest rate ceiling on fresh FCNR

ICICIdirect Research 18 Jun 2026 DISCLAIMER

News: The RBI has temporarily removed the interest rate ceiling on fresh FCNR(B) deposits with maturities of three to five years and NRE deposits of three years and above until September 30, 2026, allowing banks to offer higher rates to attract overseas deposits. Following the RBI’s decision to bear hedging costs, banks have already increased FCNR(B) deposit rates by 250–450 bps, and the removal of the earlier 350 bps cap over the reference rate could enable some lenders to offer rates of up to 8%, subject to their funding requirements.

View: The temporary removal of interest rate caps is likely to provide banks with greater flexibility to price FCNR(B) and NRE deposits more competitively, thereby supporting higher overseas deposit mobilisation and strengthening the liability franchise. However, the relaxation may not materially benefit banks’ profitability, as the savings from the RBI’s hedging support are likely to be largely passed on to depositors through higher interest rates amid competitive pressures. The primary benefit is therefore expected to be improved deposit accretion and foreign currency inflows.

Impact: Neutral

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