Equitas Small Finance Bank Tops the Chart with 7.52% on USD FCNR Deposits as Competition Intensifies Among Banks to Attract NRI Funds

Non-Resident Indians (NRIs) holding US dollar savings have received a significant investment opportunity as Indian banks compete aggressively to attract foreign currency deposits. Following the Reserve Bank of India's (RBI) temporary relaxation of interest rate regulations on Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, several banks have raised deposit rates sharply, with Equitas Small Finance Bank now offering an industry-leading 7.52% annual interest on eligible US dollar deposits.

The revised rates make FCNR(B) deposits one of the most attractive fixed-income investment options currently available for NRIs, especially at a time when global investors are looking for secure, tax-efficient and currency-protected investment avenues.

Industry experts believe the latest rate revisions could lead to a fresh wave of NRI inflows into India's banking system, strengthening foreign currency reserves while providing attractive returns to overseas Indians.

Equitas Small Finance Bank Leads the Market

Equitas Small Finance Bank has emerged as the highest-paying bank in the FCNR(B) segment after revising its interest rates.

Latest USD FCNR(B) Deposit Rates

The revised rates place Equitas marginally ahead of its closest competitors and significantly above most large commercial banks.

For NRIs seeking predictable dollar-denominated returns without currency conversion risk, the offering has become one of the most competitive products currently available in the market.

Small Finance Banks Outperform Large Banks

The latest interest rate revisions have widened the gap between small finance banks and larger private or public sector lenders.

Comparison of Major Banks

While large banks continue to attract customers through their wider branch networks and established reputation, small finance banks are using higher interest rates to strengthen their NRI deposit base.

This growing competition has created a favourable environment for overseas investors looking to maximise returns on foreign currency savings.

Why Banks Are Raising FCNR Deposit Rates

The sharp increase in FCNR(B) rates follows a policy decision by the Reserve Bank of India aimed at encouraging foreign currency inflows.

The RBI has temporarily relaxed the interest rate ceiling on fresh FCNR(B) deposits with maturities between three and five years, and the relaxation will remain effective until September 30, 2026.

The objective of this measure is to:

• Increase foreign currency deposits.

• Improve banking system liquidity.

• Strengthen India's external financial position.

• Enhance foreign exchange reserves.

• Reduce dependence on volatile overseas capital flows.

Banks have responded by aggressively revising deposit rates to attract NRI funds before the temporary regulatory window closes.

Understanding FCNR(B) Deposits

A Foreign Currency Non-Resident (Bank) deposit is a fixed deposit account designed exclusively for Non-Resident Indians.

Unlike conventional fixed deposits held in Indian rupees, FCNR(B) deposits are maintained entirely in foreign currency.

Eligible currencies include:

• US Dollar (USD)

• Pound Sterling (GBP)

• Euro (EUR)

• Japanese Yen (JPY)

• Australian Dollar (AUD)

• Canadian Dollar (CAD)

Both the principal amount and the interest are repaid in the same foreign currency, eliminating exchange rate risk for the depositor.

Why FCNR(B) Deposits Are Becoming Popular

The recent increase in interest rates has made FCNR(B) deposits significantly more attractive for overseas Indians.

Protection Against Currency Fluctuations

One of the biggest advantages is protection from rupee depreciation.

Since deposits remain in foreign currency throughout the investment period, investors are not exposed to exchange rate volatility.

For NRIs earning salaries in US dollars or other eligible currencies, this offers greater financial certainty.

Attractive Dollar Returns

Interest rates exceeding 7.5% are considerably higher than those available on many comparable fixed-income products in developed economies.

For conservative investors, this provides an opportunity to earn stable returns without taking equity market risk.

Tax Efficiency

For eligible NRIs, interest earned on FCNR(B) deposits is generally exempt from income tax in India.

This enhances the effective post-tax return, making the product particularly attractive for long-term investors.

However, investors should also review tax regulations applicable in their country of residence.

Safe and Predictable Investment

Unlike market-linked products, FCNR(B) deposits offer fixed returns over the chosen tenure.

The combination of capital protection, predictable income and foreign currency denomination makes them suitable for investors with low risk tolerance.

Who Should Consider FCNR(B) Deposits?

These deposits are particularly suitable for:

• NRIs earning income in US dollars or other eligible currencies.

• Professionals working abroad.

• Overseas business owners.

• Individuals planning to return to India after several years.

• Investors seeking diversification from equity markets.

• Families saving for future education or retirement expenses.

The product is especially beneficial for investors who want to preserve their purchasing power in foreign currency while earning attractive fixed returns.

Industry Competition Is Heating Up

Banks are expected to continue competing aggressively for NRI deposits over the coming months.

Several factors are driving this trend:

• RBI's temporary regulatory relaxation.

• Rising global interest rates.

• Strong demand for foreign currency funding.

• Increasing overseas remittances.

• Improving confidence in India's financial system.

Small finance banks are likely to remain the most aggressive players due to their need to expand deposit bases and strengthen liquidity.

Things Investors Should Compare Before Investing

While interest rate remains an important consideration, investors should evaluate several additional factors before choosing a bank.

Key Evaluation Parameters

• Interest rate offered.

• Minimum deposit amount.

• Premature withdrawal conditions.

• Deposit tenure.

• Reputation and financial strength of the bank.

• Customer service quality.

• Online banking facilities.

• Tax implications in the country of residence.

Choosing the highest interest rate may not always be the best decision if other service-related factors are less favourable.

Will Rates Remain This High?

The current high interest rates are largely linked to the RBI's temporary policy relaxation.

Once the relaxation expires after September 30, 2026, banks may reassess their pricing depending on:

• Global interest rate trends.

• Foreign currency liquidity.

• Demand for NRI deposits.

• RBI policy decisions.

• Market competition.

NRIs considering FCNR(B) deposits may therefore find the current period favourable for locking in higher long-term rates.