The previous limit was ARR + 200 basis points, making it a noticeable rise
According to the RBI statement on December 6, 2024, “ In order to attract more capital inflows, it has been decided to increase the interest rate ceilings on FCNR(B) deposits. Accordingly, with effect from today (December 6, 2024), banks are permitted to raise fresh FCNR(B) deposits of 1 year to less than 3 years maturity at rates not exceeding ARR plus 400 bps and deposits with maturity between 3 to 5 years at rates not exceeding ARR plus 500 bps. This relaxation will be available till March 31, 2025.”
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According to the RBI notification as on December 6, 2024, “It has been decided to increase the interest rates ceiling on fresh FCNR(B) deposits raised by the banks with effect from December 06, 2024 as under:
| Period of Deposit | Ceiling Rate |
| 1 year to less than 3 years | Overnight Alternative Reference Rate for the respective currency/ Swap plus 400 basis points |
| 3 years and above upto and including 5 years | Overnight Alternative Reference Rate for the respective currency/ Swap plus 500 basis points |
Source: RBI website
If you are an NRI and wish to maintain a fixed deposit account in India, you can opt for an FCNR Account that allows you to save money earned overseas in Foreign Currency.Also Read | Relief for home loan borrowers in 2025: Big savings on EMIs as RBI likely to cut rates by 50-100 bps in new year
What is an FCNR (B) account?
According to the ICICI Bank website, “An FCNR (B) account lets you maintain a fixed deposit in India in freely convertible foreign currencies for a tenure ranging from one to five years. Since the account is maintained in foreign currency, it secures your funds against currency fluctuations during the tenure of the deposit. Like a Non-Resident External (NRE) bank account, the funds in this account and the interest earned are tax-free in India.”
Most banks book FCNR deposits in the following currencies.
- US Dollars
- Pounds Sterling
- Euro
- Japanese Yen
- Australian Dollars
- Canadian Dollars
Premature withdrawals of FCNR (B) Deposits
According to the SBI website, “No interest is payable, if the deposit is withdrawn before one year. No premature penalty for the deposit withdrawn after completion of one year. However, interest shall be paid at the rate applicable for the period deposit has remained with the Bank. Interest will be paid at the rate available on the date of deposit.
What are the features of an FCNR Account?
According to the HDFC Bank website, “Here are some features of an FCNR Account that make it an extremely feasible option to invest and maintain funds in India-
- FCNR Accounts are Term Deposit Accounts and not a Savings Account. Premature withdrawal is allowed by Banks but Interest is paid only post completion of 1 year.
- You can open an FCNR Account by transferring money from your existing Non-Resident External (NRE) Account.
- The interest you earn on your deposits on FCNR Accounts is tax-free, e., it is not taxable in India.
- The Principal amount of your FCNR deposit and the interest you earn thereon is fully repatriable, e., it is completely transferable.
- You can also avail an overdraft facility over your FCNR Term Deposit Account.
- Therefore, if you are looking for an option to save your money in foreign denominations, FCNR Accounts are an excellent choice.”
