FCNR(B) Deposit 2026: Rates, Tax and Eligibility
For years, FCNR(B) deposits paid NRIs 2-4% on dollar deposits while NRE FDs offered 6-7% in rupees. The reason was simple: every bank that accepts your FCNR(B) deposit converts dollars to rupees to lend domestically, creating a currency mismatch. Covering that risk costs banks 3-3.5% a year, and they passed it straight to you through lower rates.
In April 2025, RBI changed that entirely. Until September 30, 2026, RBI absorbs that hedging cost for banks on all new FCNR(B) deposits. Banks now have room to offer up to 6% on USD deposits tax-free in India, with zero rupee risk on your end. This guide covers current rates across SBI, HDFC, ICICI, and Axis Bank, what you owe in tax based on where you live, who is eligible, how to open one, and what happens when the window closes.
What Is an FCNR(B) Deposit?
FCNR(B) Foreign Currency Non-Resident (Bank) is a fixed deposit that lets NRIs, PIOs, and OCIs hold money in India in foreign currency. You deposit in USD, GBP, EUR, CAD, AUD, or JPY. Interest accrues in that same currency. At maturity, principal and interest both return in your currency, fully repatriable under FEMA with no upper limit.
No currency conversion happens at any point. You put in dollars. You get out dollars. The rupee’s movement during your tenure is completely irrelevant to your return, which is the one thing NRE FDs cannot offer.
Minimum tenure is 1 year. The maximum is 5 years. Joint holding is permitted with another NRI/PIO/OCI, or with a resident Indian relative on a former-or-survivor basis per RBI Master Directions on NRI accounts. Nomination facility is available, and the nominee does not need to be an NRI.
What RBI Changed And Why
RBI announced in April 2025 that it will absorb the currency hedging cost for banks on FCNR(B) deposits opened until September 30, 2026. This removes a 3-3.5% annual cost that banks were passing to depositors through lower rates.
Before the announcement, a bank offering you 4% on a dollar deposit spent 7-7.5% in total: 4% to you plus 3-3.5% on the currency hedge. With RBI absorbing the full hedging cost of 3–3.5% per annum (RBI circular, June 5, 2026, rbi.org.in), SBI Research estimates banks can offer FCNR(B) pricing of 5.5% or higher.
RBI’s reason is straightforward. The rupee faced sustained depreciation pressure through 2024-2025. India needs dollar inflows to stabilise the currency and rebuild forex reserves. RBI ran the same scheme in 2013 that window pulled $34 billion into India, representing 12% of the country’s total forex reserves at the time (Business Standard, May 2025). The RBI circular (dated April 2025) specifies September 30, 2026, as the deadline for this facility.
Top Banks’ FCNR(B) USD Rates Compared
SBI (State Bank of India) SBI is the default choice for most NRIs opening their first Indian account, and on FCNR(B), it currently offers the highest 1-year USD rate in the table at 4.40% (w.e.f. January 15, 2026). SBI Research is itself projecting FCNR(B) pricing of 5.5% or higher once the RBI subsidy transmits.
HDFC Bank leads on 3–4 year USD tenures at 3.65% (w.e.f. June 1, 2026), making it the strongest option if you want a longer lock-in before the September deadline. HDFC also accepts SGD alongside the standard six currencies useful for Singapore-based NRIs. Its NRI net banking platform is consistently rated among the most seamless for overseas account opening and FD booking, which matters if you are onboarding digitally without visiting India.
ICICI Bank currently offers the most conservative FCNR(B) USD rates in the table at 3.85% for 1–2 year tenures (w.e.f. June 9, 2026). ICICI has one of the strongest NRI service networks internationally, with dedicated NRI relationship managers in major markets including the UAE, the US, and the UK. Worth watching closely as rate revisions come through.
Axis Bank sits at 4.00% for 1–2 year USD tenures (w.e.f. March 2, 2026), second only to SBI in that bucket. Axis offers FCNR(B) deposits in JPY, which SBI and HDFC also offer, but ICICI has discontinued. For Japan-based NRIs specifically, Axis is one of the few remaining options. Its NRE FD rates are among the most competitive at 6.25–6.45% (w.e.f. June 9, 2026) for those who prefer rupee exposure alongside an FCNR(B) position.
Note: These are pre-revision figures. Banks have not yet fully passed on the RBI hedging subsidy. The 1-2 year USD bucket is where the largest upward revision is expected through June-August 2026.
| Tenure | SBI | HDFC Bank | ICICI Bank | Axis Bank |
| 1 yr to < 2 yrs | 4.40%* | 3.95% | 3.85% | 4.00% |
| 2 yrs to < 3 yrs | 3.55% | 3.60% | 3.35% | 3.50% |
| 3 yrs to < 4 yrs | 3.35% | 3.65%* | 3.00% | 3.25% |
| 4 yrs to < 5 yrs | 2.95% | 3.40% | 2.90% | 2.95% |
| 5 years | 3.05% | 3.40% | 2.90% | 2.95% |
Sources: SBI (sbi.bank.in, w.e.f. January 15, 2026) | HDFC Bank (hdfcbank.com, w.e.f. June 1, 2026) | ICICI Bank (icicibank.com, w.e.f. June 9, 2026) | Axis Bank (axisbank.com official FCNR/RFC rate sheet, w.e.f. March 2, 2026)
When will banks show revised rates?
They get the current rates shown on each bank’s website, not the expected higher rates. The RBI circular became operational on June 8, 2026. Banks can now access the RBI’s swap facility for eligible deposits. The transmission lag is real; banks need time to price the benefit, update systems, and publish revised rates.
No bank has publicly committed to a specific revision date. Most revisions are expected within 4–8 weeks of the June 8 operational circular.
The Green signals: SBI Research is projecting 5.5% or higher. Emkay Global projects 6.0–6.6%. These are analyst estimates, not bank commitments.
Tax on FCNR(B) Deposits By Country
India tax: Zero. Interest earned on FCNR(B) deposits is fully exempt from income tax in India under Section 10(15)(iv)(fa) of the Income Tax Act, 1961. This exemption applies to NRIs, PIOs, OCIs, and those holding RNOR status, and continues for the entire deposit tenure. No TDS is deducted. No filing is required for this income alone in India.
India’s exemption does not override what you owe in your country of residence.
| Country | India Tax | Home Country | Net Position |
| UAE | Nil | No personal income tax | Full rate kept the cleanest case |
| US | Nil | Taxable worldwide income; FBAR + FATCA may apply | Factor the US marginal rate into the net return |
| UK | Nil | Taxable as a foreign interest under HMRC | Factor the UK income tax rate into the net return |
| Singapore | Nil | Likely exempt if not remitted to Singapore | Verify with local advisor |
| Canada | Nil | Taxable as foreign income; T1135 may apply above CAD 100K | Factor the Canadian marginal rate into the net return |
UAE
No personal income tax. FCNR(B) interest is untaxed in both countries. The full nominal rate is your effective return. [Certain under the current UAE tax law]
US
The IRS taxes US persons on worldwide income. Your FCNR(B) interest is taxable as foreign-sourced income. If your aggregate foreign financial account balances exceed $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114). FATCA reporting via Form 8938 may also apply. At a 32% federal marginal rate, a 6% FCNR(B) yield nets approximately 4.1% after US tax, still competitive against US high-yield savings at 4-5%, but not the headline 6%. Consult a US CPA with international tax experience before investing.
UK
HMRC taxes UK residents on worldwide income, including foreign interest. Since India taxes FCNR(B) at zero, the India-UK DTAA provides no offsetting credit; your full FCNR(B) interest is taxable at your UK marginal rate of 20%, 40%, or 45%. The Personal Savings Allowance (GBP 500 for higher-rate taxpayers) may partially shelter smaller amounts. Consult a UK tax advisor before investing. [Likely verify with HMRC guidance]
Singapore
Singapore generally does not tax foreign-sourced income that is not remitted into Singapore. If your FCNR(B) interest stays outside Singapore, it may not be taxable there. The exemption has specific conditions verify with a Singapore tax advisor. [Guessing on specific applicability]
Canada
Canada taxes residents on worldwide income. FCNR(B) interest is taxable in the year received. The India-Canada DTAA provides no offsetting credit since India taxes it at zero. If your foreign property, including FCNR(B) deposits, exceeds CAD 100,000 at any point in the year, a Form T1135 filing may be required.
Who Is Eligible and How to Open One
Any NRI, PIO, or OCI can open an FCNR(B) deposit. OCIs are fully eligible; you do not need an Indian passport. Under FEMA (Foreign Exchange Management Act, 1999), you qualify as an NRI if you have resided outside India for more than 182 days in the preceding financial year, or have documented intent to live abroad indefinitely.
Currencies accepted: USD, GBP, EUR, CAD, AUD, JPY. SGD is accepted at select banks, including HDFC Bank.
If you already hold an NRE or NRO account:
Log in to your bank’s net banking or mobile app, navigate to NRI deposits, select FCNR(B), choose your currency and tenure, and fund from your NRE account. SBI, HDFC, ICICI, and Axis Bank all support this end-to-end online.
If you are new to Indian banking:
You must complete KYC before opening any NRI account. For onshore branches, this requires either a physical visit to an Indian branch or a notarised and apostilled documentation process from abroad, which can take several weeks depending on your country. Documents typically required:
- Valid passport
- Visa or work permit / residence permit
- Overseas address proof
- PAN card or Form 60
- FATCA/CRS declaration for residents of CRS-signatory countries
Premature withdrawal: No interest is paid if you withdraw before completing 1 year at any major bank. After 1 year, SBI, HDFC, and ICICI allow withdrawal without penalty, paying interest at the rate applicable to the actual period held.
What Happens After September 30, 2026
RBI’s hedging subsidy ends, and banks revert to bearing the full hedging cost themselves. New FCNR(B) rates will fall back toward the pre-announcement range of 2-4% on USD.
Deposits already booked before the deadline stay unaffected. The rate you lock in is contractually fixed for your full tenure. A 3-year deposit booked at 6% in August 2026 earns 6% for all 3 years.
Conclusion
A 6% tax-free dollar FD is a genuinely good instrument. But whether it belongs in your portfolio depends on questions this article cannot answer for you: How much of your net worth is already tied to India? Do you need rupee liquidity in the next two years? What does your home-country tax position actually look like? Is locking dollars into a 3-year FD the best use of that capital given your broader goals?
That is exactly the kind of assessment Moneyvesta NRI Advisory exists to give you. As a SEBI-registered, fee-only investment advisor, our responsibility is to evaluate every recommendation in the context of your financial goals, liquidity needs, tax position, and overall portfolio. Whether FCNR(B) deposits are suitable for you or not, our advice remains objective, transparent, and aligned solely with your best interests.