FCNR(B) deposits are accounts where Non-Resident Indians (NRIs) can hold their earnings in foreign currencies like USD or GBP, protecting them from exchange rate fluctuations.
The Reserve Bank of India (RBI) has increased the interest rate cap on Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits. The FCRNB is a window that allows NRIs to park their foreign currency savings in Indian banks.
Banks can now offer rates up to 400 basis points above the Overnight Alternative Reference Rate (ARR) for deposits with maturities between 1 year and less than 3 years. This is a significant increase from the earlier limit of 200 basis points over the ARR.
Higher interest rates may allow banks to attract more foreign currency flows.
The move is part of the RBI’s broader efforts to shore up the rupee, ensure financial stability and support the country’s external sector amidst global uncertainties.
The Indian rupee has hit consistently weakened against the US dollar and hit new record lows, over the last one year.
According to Rajiv Anand, Deputy Managing Director of Axis Bank, the move is in line with the RBI’s efforts to attract dollar deposits, the current market environment might limit its immediate impact. Incentives such as the reduction of the cash reserve ratio by 50 basis points, may further encourage banks to mobilise more deposits from NRIs, he added in a conversation with CNBC-TV18.
Reference From Below Link
https://www.cnbctv18.com/personal-finance/rbi-allows-higher-interest-rates-cap-fcnr-deposits-foreign-inflows-mpc-policy-19520289.htm
