HDFC Bank Rockets Foreign Deposit Rates to 6% as Market Competition Intensifies

HDFC Bank Rockets Foreign Deposit Rates to 6% as Market Competition Intensifies​

HDFC Bank has significantly increased interest rates on its Foreign Currency Non-Resident (FCNR) deposits, attracting attention from non-resident Indians (NRIs). The bank’s updated rate card, effective June 10, 2026, brings the FCNR deposit rate for three-year to five-year tenures up to 6 percent.

This rate revision marks a substantial leap from the previous offering of 3.65 percent that was available until June 9. This jump translates into an increase of 235 basis points and stands out as one of the steepest increases observed in FCNR deposit rates recently.

Boosting Attractiveness for NRI Depositors​

The move by HDFC Bank aims to make its long-term foreign currency deposits highly competitive for NRIs looking to secure elevated returns. These deposits allow non-residents to place their funds with Indian banks in specific foreign currencies like the US dollar, pound sterling, euro, and Japanese yen.

FCNR(B) accounts are ideal for Overseas Citizens of India (OCIs) and NRIs whose future capital requirements or liabilities are denominated in a foreign currency. These deposits offer a sovereign-backed return without the risk associated with INR depreciation.

Market Landscape and Competitive Rates​

HDFC Bank's move comes as market players across the banking sector respond to shifting global financial needs. While HDFC has sharply raised its rates, other major institutions maintain competitive offers for NRIs.

For comparison, SBI and Bank of Baroda currently offer up to 3.35 percent on three- to five-year FCNR(B) deposits. Kotak Mahindra Bank is offering a rate up to 3.4 percent, while ICICI and Axis Bank are providing rates of up to 3 percent and 3.25 percent, respectively.

RBI's Intervention and Funding Backdrop​

The interest hike by HDFC comes against a background where the Reserve Bank of India (RBI) noted a sharp decline in FCNR(B) inflows. In fiscal year 2025, inflows exceeded $7 billion, but this figure fell to only $946 million in FY26.

To address this trend and stabilize the market, the RBI implemented a concessional swap facility valid until September 30, 2026. This facility is designed to cover the full hedging costs for banks that attract new three- to five-year FCNR(B) deposits.

Understanding the Value of FCNR Deposits​

FCNR(B) deposits are fixed deposit accounts that allow NRIs to hold foreign currencies within India's banking system. Unlike NRE deposits, these accounts restrict currency choice but offer stability and protection from exchange rate fluctuations.

These instruments efficiently permit individuals to park foreign earnings in India while avoiding the risks inherent in currency depreciation. Furthermore, interest income earned on FCNR(B) deposits is tax-exempt if the depositor qualifies as a "person resident outside India" or meets specific "Resident but Not Ordinarily Resident" (RNOR) criteria under Indian tax laws.