Federal Bank has launched the FCNR Max Deposit Scheme, a special Foreign Currency Non-Resident (Bank) deposit product designed for Non-Resident Indians. The scheme offers an attractive 6.25% annual interest rate on US Dollar deposits with tenures ranging from three to five years. Available for a limited period until September 2026, the product is part of a broader industry move by banks to tap into NRI deposits following the RBI’s recent FCNR(B) swap facility announcement.
What Is the FCNR Max Deposit Scheme?
The FCNR Max Deposit Scheme is a limited-period offering introduced by Federal Bank on June 11, 2026. It is a variant of the standard FCNR(B) deposit, available exclusively in US Dollars. The scheme targets NRIs looking for secure, higher-yield avenues to park their overseas earnings while retaining foreign currency exposure.
| Feature | Details |
|---|---|
| Currency | US Dollar (USD) only |
| Tenure | 3 years to 5 years |
| Interest rate | 6.25% per annum |
| Minimum deposit | USD 500 |
| Lock-in period | 1 year |
| Premature withdrawal | Allowed after 1 year; interest reduced by 1% |
| Auto-renewal | Not available; on maturity, converted to regular FCNR cash certificate |
| Validity | Until September 30, 2026 |
Deposits above USD 1 million also earn the same rate of 6.25%. The scheme has a mandatory lock-in of one year, during which no premature closure is permitted. If closed after the lock-in period but before maturity, interest is paid at a rate 1% lower than the applicable rate for the period the deposit was held. The product does not offer auto-renewal; upon maturity, the deposit converts into a regular FCNR cash certificate at prevailing rates.
The scheme is structured in line with the RBI’s forex swap facility, which allows banks to offer competitive FCNR deposit rates by passing the currency hedging cost to the central bank, making such products more viable for lenders.
Understanding FCNR(B) Deposits
FCNR(B) stands for Foreign Currency Non-Resident (Bank). It is a term deposit account introduced by the Reserve Bank of India on May 15, 1993, replacing the older FCNR(A) scheme that had been in place since 1975. The FCNR(A) scheme was phased out in August 1994 because the foreign exchange risk it placed on the RBI and the government had become too costly.
Unlike the standard NRE (Non-Resident External) account, which is maintained in Indian Rupees, an FCNR(B) account allows NRIs to hold fixed deposits in freely convertible foreign currencies. This means the depositor’s money is protected from exchange rate fluctuations for the duration of the deposit.
Key features of FCNR(B) deposits:
| Feature | Details |
|---|---|
| Eligible depositors | NRIs, Persons of Indian Origin (PIOs), Overseas Citizens of India (OCIs) |
| Permitted currencies | USD, GBP, EUR, JPY, CAD, AUD, and other freely convertible currencies |
| Tenure | 1 year to 5 years |
| Interest payment | Calculated on 360-day basis, paid every 180 days |
| Taxability | Interest earned is exempt from income tax in India |
| Repatriability | Both principal and interest are fully repatriable without upper limits |
| Governing law | Foreign Exchange Management Act (FEMA), 1999 |
Deposits under the FCNR(B) scheme are fully repatriable, meaning the entire principal and accrued interest can be transferred back to the depositor’s overseas account without any restrictions. The interest earned is tax-free in India as long as the depositor qualifies as a non-resident under Indian tax laws. However, it must still be disclosed as exempt income in tax returns.
Banks can accept FCNR(B) deposits in any freely convertible currency, though USD, GBP, EUR, JPY, CAD, and AUD are the most commonly offered ones. Interest rates on these deposits are typically linked to internationally accepted benchmark rates and are set by individual banks within the ceiling prescribed by the RBI.
Why Banks Are Targeting NRI Deposits Now
The sudden flurry of special FCNR(B) schemes from multiple banks is directly linked to the RBI’s FCNR(B) swap facility, announced in early June 2026. Under this facility, the RBI offers banks a zero-cost forex swap on fresh FCNR(B) deposits with tenures of three to five years. This means the central bank bears the full currency hedging cost, enabling banks to offer higher interest rates to NRI depositors without hurting their margins.
The scheme is available for deposits mobilized between June 2026 and September 30, 2026, and covers both fresh deposits and renewals upon maturity. It has a one-year lock-in period for the underlying deposits.
This is not the first time the RBI has used this tool. A similar FCNR(B) swap window was deployed in 2013 during the taper tantrum, when the rupee came under severe pressure. That scheme attracted about USD 26 billion in inflows and helped stabilize the currency. The difference this time is that the RBI is bearing the hedging cost fully, rather than providing a 3.5% subsidy as it did in 2013.
Following this announcement, several banks have launched special FCNR(B) products:
| Bank | Scheme | Interest Rate (USD, 3-5 years) |
|---|---|---|
| Federal Bank | FCNR Max Deposit Scheme | 6.25% |
| Canara Bank | Special FCNR(B) Scheme | Up to 6.50% |
| Bank of Baroda | Special FCNR(B) Deposit | 6.00% to 6.25% |
| Indian Overseas Bank | Special NRI FCNR Scheme | 6.50% |
The RBI has also relaxed rules to allow banks to issue letters of credit and guarantees against these deposits, enabling NRIs to leverage their FCNR(B) holdings for larger investments in India. This round of measures is aimed at boosting foreign currency inflows at a time of global uncertainty and supporting the rupee.
About Federal Bank
Federal Bank is one of India’s oldest private sector banks. It was originally incorporated on April 23, 1931 at Nedumpuram, near Thiruvalla in Central Travancore, under the Travancore Companies Act. The bank was founded by K. P. Hormis and was initially called the Travancore Federal Bank. On December 2, 1949, it was renamed The Federal Bank Limited after completing formalities under the Banking Regulation Act, 1949.
The bank became a Scheduled Commercial Bank in 1970. Its corporate identity number is L65191KL1931PLC000368, and it is listed on the NSE (symbol: FEDERALBNK) and BSE (scrip code: 500469).
| Key Fact | Details |
|---|---|
| Headquarters | Aluva, Kochi, Kerala |
| MD & CEO | KVS Manian |
| Branch network | 1,589+ banking outlets |
| Total business mix | ₹5.78 lakh crore (March 2026) |
| Overseas presence | Representative offices in Dubai and Abu Dhabi; IFSC Banking Unit at GIFT City |
Federal Bank has a strong NRI banking franchise, which it services through its overseas representative offices and digital banking channels. The launch of the FCNR Max Deposit Scheme is a continuation of the bank’s strategy to strengthen its liability base by offering competitive products to the Indian diaspora.
Key Takeaways
- The FCNR (B) scheme was introduced on May 15, 1993, replacing the older FCNR(A) scheme that had been in place since 1975.
- The FCNR Max Deposit Scheme from Federal Bank offers 6.25% per annum on USD deposits for tenures of 3 to 5 years, with validity up to September 30, 2026.
- FCNR(B) deposits are fully repatriable and the interest earned is exempt from income tax in India for non-resident depositors.
- The RBI’s FCNR(B) swap facility (June 2026) bears the full currency hedging cost for banks, enabling them to offer higher rates on deposits mobilized until September 30, 2026.
- Federal Bank, founded on April 23, 1931, is headquartered in Aluva, Kochi, Kerala and is listed on the NSE and BSE.
- The scheme has a one-year lock-in period; premature closure after one year attracts a 1% lower interest rate than the applicable rate.
