The government’s latest move makes FCNR(B) deposits in 2026 more attractive for NRIs by covering the full hedging cost on fresh 3- to 5-year deposits until September 30, 2026.
This means banks can pass more of the returns on FCNR deposits 2026 directly to depositors.
In plain terms, it will improve the post-hedge yield on foreign-currency deposits without changing the core feature that makes FCNR useful.
What government has offered
The key benefit announced in June 2026 is a concessional swap/hedging arrangement for banks raising fresh FCNR(B) deposits of 3 to 5 years’ maturity, with the government/RBI bearing the full hedging cost until September 30, 2026.
This matters because banks usually factor the hedge expense into the interest they offer, so removing that cost lets them quote better rates to NRI depositors.
How FCNR deposits work
FCNR(B) is a term deposit account available only to eligible NRIs, with a minimum tenor of 1 year and maximum of 5 years. Funds can be placed in permitted foreign currencies through eligible remittances, and principal plus interest are fully repatriable in foreign currency.
These deposits are different from ordinary rupee deposits because the currency remains foreign throughout the tenure. Banks can also allow loans or overdrafts against FCNR(B) deposits for permitted purposes. The account can continue till maturity even after the depositor returns to India for permanent settlement.
How FCNR saves currency risk
FCNR(B) deposits are held in designated foreign currencies such as USD, GBP, EUR, JPY, CAD, and AUD, so the depositor’s principal and interest stay linked to that currency rather than being converted into rupees.
Because the deposit value is not exposed to rupee conversion at maturity, the NRI is insulated from rupee depreciation or appreciation versus the deposit currency.
That is why FCNR is especially useful when the depositor wants to preserve foreign-currency value for future overseas expenses, family needs, or global portfolio allocation. The bank may hedge its own rupee exposure, but the depositor’s currency risk is largely eliminated by the structure of the account itself.
The biggest benefit is better net returns, because banks no longer need to absorb the hedging cost on the eligible fresh deposits.
This is what RBI has enabled as most banks have added the cost savings of hedging to depositors’ returns, taking FCNR (B) deposit rate around 7%, and smaller banks can even give you more.
Tax treatment
Interest earned on FCNR(B) deposits is exempt from income tax in India for eligible non-resident depositors.
That tax treatment is one of the reasons FCNR remains popular alongside NRE deposits, especially for NRIs seeking cleaner post-tax returns. However, the exemption applies only while the account qualifies under FCNR rules, so residency status and account classification must be checked carefully.
The DICGC Benefit For FCNR Deposits 2026
The FCNR deposits are just like any other FD and are covered upto 5 lac rupees per depositor by Deposit Insurance and Credit Guarantee Corporation (DICGC) per bank. The limit of 5 lacs is across all your deposits with same bank. The payout will be in INR only for deposit insurance in case insurance gets triggered.
In short, the latest FCNR support is a meaningful win for NRIs: it improves returns, preserves foreign-currency safety, and keeps the tax advantages intact. For anyone holding funds abroad and looking for a low-risk route into India, FCNR becomes an even stronger option now.
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