For an overview of FCNR deposits, see FCNR deposit: rates, US tax and how it works.
Between June 8 and September 30, 2026, Indian banks paid 6% to 7.1% on three-to-five-year U.S. dollar FCNR(B) deposits. An FCNR(B) deposit is a fixed deposit that an NRI holds at an Indian bank in a foreign currency. The rate was that high because the Reserve Bank of India paid the banks' currency-hedging cost for deposits booked in that window, and the RBI window is explained here. This post sets that yield against the places a U.S.-based NRI already holds dollars, and against a rupee NRE deposit.
The rupee was still weakening in June 2026. The dollar bought ₹95.11 at the close on June 12, 2026, against ₹94.91 a week earlier. That is a further 0.21% of rupee depreciation. It shows why a dollar-denominated instrument appeals to an NRI whose obligations are in dollars.
Why this is better than an NRE deposit in this window
NRE deposits can carry attractive rupee rates, but they are rupee-denominated. Principal and interest are exposed to the USD/INR exchange rate.
On the analysis this publication consistently applies, a 7% NRE rate set against roughly 3.5% of structural annual rupee depreciation yields an effective dollar return near 3.5%, before U.S. tax. FCNR(B) pays 6% in dollars, with the currency risk removed.
For a U.S.-based NRI whose liabilities and spending are in dollars, it is the cleaner instrument by a sizable margin in this particular window.
FCNR(B) against the dollar alternatives held in the United States
The table compares the deposit with a high-yield savings account (HYSA), a U.S. certificate of deposit (CD) and a U.S. Treasury.
| FCNR(B) | HYSA | US CD | Treasury | |
|---|---|---|---|---|
| Yield (USD) | 6.0–7.1% | 3.0–4.5% | 3.7–4.25% | 3.7–4.55% |
| Held at | Indian bank | US bank | US bank | US govt |
| Liquidity | 1-yr lock | Liquid | To maturity | Liquid |
| Currency risk | None | None | None | None |
| US tax | Ordinary | Ordinary | Ordinary | Fed only |
| Backing | DICGC ₹5L | FDIC $250k/bank | FDIC $250k/bank | US credit |
Yields pre-U.S.-tax, all columns on equal footing. FDIC cover is $250,000 per depositor, per bank, per ownership category and can be multiplied across institutions. DICGC ₹5 lakh (~$5,300) is the effective per-bank ceiling.
On yield alone, FCNR(B) beat every dollar alternative in June 2026, by 150 to 300 basis points (1.5 to 3 percentage points). The cost of that advantage is less liquidity and weaker deposit insurance.
The two insurance schemes are not comparable in practice. FDIC cover is $250,000 per depositor, per bank, per ownership category, so a U.S. saver can multiply it well beyond $250,000 by spreading balances across institutions and account types.
DICGC (India's Deposit Insurance and Credit Guarantee Corporation) covers ₹5 lakh, roughly $5,300. That is the effective ceiling per bank, and there is no comparable workaround for a large deposit.
A high-yield savings account also stays fully liquid, while FCNR(B) locks the funds for the term. The prudent approach is to split the money. Keep an emergency reserve in a U.S. high-yield account, and put into term deposits only the dollars you are unlikely to need for three to five years.
One clarification on a common claim
FCNR(B) interest is exempt from tax in India, but it is not exempt for the U.S. depositor. As a U.S. tax resident, you owe ordinary income tax on the interest as it accrues. Because India levies none, no foreign tax credit is available to offset it.
The comparison above is stated pre-U.S.-tax, the same basis as every other column, since HYSA, CD and Treasury interest are likewise taxable. The FCNR(B) yield advantage survives the tax, but the deposit is not a tax strategy in itself.
The rate board
Posted USD FCNR(B) rates by tenor, as of June 11, 2026.
| Bank (USD FCNR-B) | 3 Yr | 4 Yr | 5 Yr |
|---|---|---|---|
| AU Small Finance Bank | 7.10% | 7.00% | 7.00% |
| Karur Vysya Bank | 7.00% | 7.00% | 7.00% |
| Kotak Mahindra (above $1M) | 6.15% | 6.15% | 6.15% |
| ICICI Bank | 6.00% | 6.00% | 6.00% |
| HDFC Bank | 6.00% | 6.00% | 6.00% |
| Axis Bank | 6.00% | 6.00% | 6.00% |
| Central Bank of India | 6.00% | 6.00% | 6.00% |
| Kotak Mahindra (≤ $1M) | 6.00% | 6.00% | 6.00% |
| Bank of Baroda | 5.50% | 5.75% | 6.00% |
| SBI (above $1M) | 5.50% | 5.75% | 6.00% |
| SBI (≤ $1M) | 5.25% | 5.50% | 5.75% |
Pre-scheme rates were near 3.5%. The rates are tiered. SBI and Bank of Baroda reach 6% only on five-year money, and SBI only above $1 million. Rates are bank-set within RBI ceilings and change frequently. Confirm the live rate and special-scheme eligibility at booking. DICGC deposit insurance covers ₹5 lakh per depositor per bank, roughly $5,300, so a large deposit at any single institution is almost entirely uninsured. Size the deposit accordingly.
Compliance guardrail
An FCNR(B) deposit is a foreign financial account. If it pushes the aggregate maximum value of your foreign accounts above $10,000 at any point in 2026, which a fresh dollar deposit will almost certainly do, it must be reported on the FBAR (FinCEN Form 114) in 2027. It will likely go on Form 8938 (FATCA) as well.
The thresholds for both forms are in our post on the $10,000 FBAR threshold and Form 8938, and the FBAR calculator adds up your accounts.
The interest is taxable as ordinary income on your U.S. return in the year it accrues, even though India exempts FCNR(B) interest for non-residents. That exemption also leaves little or no foreign tax credit to offset the U.S. liability. Work out the after-tax figure before committing to the headline rate.
Putting the comparison to use
The sections above point to a short order of work for dollars you are thinking of moving:
- Set aside the emergency reserve first. It stays in a U.S. high-yield account, where it is liquid and FDIC cover can be spread across banks.
- Decide how much you will not need for three to five years. Only that amount is a candidate for FCNR(B), because the first year is locked and the rate is fixed for the term.
- Size the deposit with the insurance gap in mind. DICGC covers about $5,300 per bank, so most of a large deposit rests on the bank itself.
- Read the rate board by tenor and balance. The same bank can pay 5.25% or 6% depending on the term and whether the deposit is above $1 million.
- Work out the figure after U.S. tax, and note the FBAR and Form 8938 filings the new account will require.
- The window for booking closed on September 30, 2026. For any later deposit, confirm the live rate and special-scheme eligibility with the bank on the day you book.
From Edition 7 of the NRI Playbook newsletter. For informational purposes only; not financial, tax, or legal advice. For decisions about your specific situation, consult a qualified cross-border tax professional.