The Reserve Bank of India is orchestrating a coordinated push to attract Foreign Currency Non-Resident (FCNR) deposits from the global Indian diaspora by absorbing hedging costs on banks' balance sheets. This removes the currency risk premium that usually makes dollar deposits expensive for lenders to offer.
Punjab National Bank has raised FCNR(B) rates to 6.10% for 4 to 5-year USD deposits, while Ujjivan Small Finance Bank is offering 7.13% per annum for 3 to 5-year tenures. Both figures exceed current US Treasury yields, making Indian bank deposits an attractive alternative for NRIs seeking guaranteed, currency-protected returns.
The rate hike is not a competitive accident. Public sector banks and small finance banks have simultaneously recalibrated pricing in response to RBI's policy shift, signalling coordinated action to maximize foreign capital inflows. This is a macroeconomic defense mechanism, not retail deposit competition.
By offering these rates, Indian banks are collectively targeting a capital influx of up to $40 billion. This inflow would help bridge the persistent current account deficit, stabilize the rupee, deepen domestic banking liquidity, and bolster foreign exchange reserves—all simultaneously.
