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The RBI has introduced a special FCNR(B) deposit window with a concessional forex swap facility to encourage foreign currency inflows, strengthen foreign exchange reserves, and support rupee stability.

About FCNR(B) Deposits

• FCNR(B) is a fixed-term foreign currency deposit account maintained with Indian banks by:
  • Non-Resident Indians (NRIs)
  • Overseas Citizens of India (OCIs)
  • Persons of Indian Origin (PIOs)
• Deposits are maintained in designated foreign currencies, protecting depositors from exchange rate risk.
• Permitted currencies include:
  • US Dollar (USD)
  • Pound Sterling (GBP)
  • Euro (EUR)
  • Japanese Yen (JPY)
  • Australian Dollar (AUD)
  • Canadian Dollar (CAD)

Objective

• Mobilise stable foreign currency resources for Indian banks.
• Strengthen India's capital account and foreign exchange reserves.
• Offer overseas Indians a tax-efficient investment avenue without rupee depreciation risk.

RBI's Special Forex Swap Facility

• Available for fresh FCNR(B) deposits of 3–5 years.
• Banks sell the foreign currency mobilised through FCNR(B) deposits to the RBI at the prevailing FBIL Reference Rate.
• Simultaneously, the RBI agrees to sell back the same amount of foreign currency to banks at maturity.
• Since the swap is conducted at par, the RBI bears the forward premium, significantly reducing banks' hedging costs.

Key Features

• Tenure: 3–5 years.
• Exchange Rate Risk: Nil for depositors, as deposits are held in foreign currency.
• Tax Benefit: Interest earned is exempt from income tax in India for eligible non-residents.
• CRR & SLR Exemption: Fresh deposits under the special window are exempt from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements, improving banks' lending capacity.
• Interest Rates: Linked to international benchmark rates and generally lower than domestic rupee fixed deposits. Banks may offer higher rates to remain competitive with overseas investment options.

FCNR(B) vs NRE vs NRO Accounts