FCNR(B): the concessional window now closes on 31 August

On 14 August 2026 the Reserve Bank of India announced that its special foreign exchange swap facility for FCNR(B) deposits will close for fresh deposits on 31 August 2026, a month earlier than the 30 September date announced when the facility was introduced.

If a non-resident client has been intending to place a deposit under this facility, the window is materially shorter than they think it is.

What an FCNR(B) deposit is

A Foreign Currency Non-Resident (Bank) deposit, universally shortened to FCNR(B), is a term deposit held with an Indian bank denominated in a foreign currency — US dollars, pounds, euros, Australian and Canadian dollars, and others that are freely convertible.

The distinction that matters is the currency. An NRE deposit is held in rupees, so the depositor carries the exchange risk: money placed at one rate may buy back fewer dollars at maturity. An FCNR(B) deposit is held and repaid in the original foreign currency, so there is no rupee exposure at all.

Tenures run from one to five years. Principal and interest are freely repatriable, and interest on FCNR(B) deposits is exempt from Indian income tax for a non-resident, which makes them a common choice for NRIs who want an Indian-bank counterparty without taking a currency position.

What the special facility did

In June 2026 the RBI introduced a concessional swap arrangement to encourage foreign currency inflows. Under it, banks raising eligible fresh FCNR(B) deposits of three to five years could swap those dollars into rupees with the RBI on favourable terms, with the RBI bearing the hedging cost.

The swap happens between the bank and the RBI. Depositors never see it. What they saw was the effect: because the hedging cost had been removed from the bank's side, banks could offer rates on three-to-five-year FCNR(B) deposits materially better than they otherwise would.

What changed

The facility worked, and that is why it is ending early. By 13 August, inflows through the three channels covered — FCNR(B) deposits, overseas foreign currency borrowings and external commercial borrowings — had crossed 56 billion US dollars, with FCNR(B) alone accounting for roughly 52 billion. The RBI cited the strength of that response in bringing the date forward.

The revised timeline:

• Fresh eligible FCNR(B) deposits must be mobilised by 31 August 2026, not 30 September.
• Banks may execute the corresponding swaps with the RBI until 11 September 2026, brought forward from 16 October.
• The parallel arrangements for external commercial borrowings and overseas foreign currency borrowings continue to 31 December 2026, unchanged.

What this does not mean

This is the part most commentary gets wrong, so it is worth stating plainly.

FCNR(B) deposits are not being discontinued. They remain an ordinary banking product and can be opened after 31 August as before. What closes is the concessional swap arrangement sitting behind them.

Existing deposits are unaffected. A deposit booked before the cut-off keeps its agreed rate for its full tenor, subject to the lock-in conditions that applied when it was placed.

Rates are not directly regulated by this. The announcement changes a facility available to banks, not a rate ceiling. Individual banks will reprice on their own timelines once the cheaper funding disappears — but the direction is not difficult to guess.

Who should act

Anyone who had planned to place a three-to-five-year FCNR(B) deposit during September on the strength of the current rates. The decision now has a date on it.

Two things worth checking before a client commits: the actual rate the bank is offering for the specific currency and tenor, since these vary considerably between banks, and whether an FCNR(B) deposit is the right instrument at all given their residential status and where they are taxed on worldwide income. A US-resident NRI, in particular, should look at the American side of the position before locking money away for five years — Indian tax exemption on the interest does not settle the question of how it is treated at home.