Indian Banks Cut FCNR Deposit Rates After RBI Swap Window Ends
By ThePip Desk
Indian banks significantly reduce FCNR deposit rates by up to 310 basis points following the RBI’s special swap window closure on September 1, 2026. Major banks like HDFC, ICICI, and SBI implement steep cuts.
Indian banks have substantially reduced interest rates on foreign-currency non-resident (FCNR) deposits, with cuts reaching 310 basis points. This move follows the conclusion of the Reserve Bank of India’s (RBI) special FCNR(B) swap window on Monday, September 1, 2026.
This ten-week facility had enabled banks to offer attractive returns on dollar deposits, aiming to draw funds from non-resident Indians.
Major Banks Implement Steep Reductions
Leading financial institutions, including HDFC Bank, ICICI Bank, and State Bank of India (SBI), have now implemented sharp reductions in their long-tenure FCNR(B) deposit rates.
HDFC Bank’s five-year US dollar FCNR(B) rate decreased from 6.25% to 3.15%, marking a 310-basis-point cut. Similarly, ICICI Bank lowered its five-year dollar deposit rate from 6.00% to 2.90%, also a 310-basis-point reduction.
SBI’s five-year FCNR(B) rate is now 3.05%. This is a reduction from 5.75% for deposits up to $1 million and 6% for deposits above $1 million, representing cuts of 270 and 295 basis points, respectively.
Understanding the RBI’s Special Swap Facility
The Reserve Bank of India introduced this special dollar-rupee swap facility in June to lower the effective cost for banks to mobilize foreign currency. This mechanism allowed banks to offer more competitive returns to non-resident depositors.
The scheme proved highly effective in attracting significant foreign currency inflows into India. Indian banks collectively mobilized $65.4 billion through FCNR(B) deposits by August 21 alone.
Total foreign-currency inflows under the RBI’s various facilities, including overseas borrowings, reached $73 billion. The strong market response prompted the RBI to advance the closure of the FCNR(B) window to August 31 from its initially planned September 30 deadline.
Market Adjusts Post-Facility Closure
The current sharp decline in long-term FCNR rates signals a shift in market dynamics. Banks are no longer offering the same premium on dollar deposits without the direct support of the RBI’s special swap facility.