Only twice in the last dozen-odd years, in 2013 and 2026, has the Reserve Bank of India used the tool called: the special FCNR(B) scheme. FCNR stands for Foreign Currency Non-Resident
The idea of FCNR is simple. An NRI puts foreign currency into an FCNR(B) deposit with an Indian bank. The bank swaps that foreign currency with the RBI for rupees. The RBI gets the foreign currency, while the bank gets rupees it can use in India.
The swap also lets banks offer NRIs higher interest rates than they normally would.
The RBI brings FCNR out when the rupee is under heavy pressure. This year, on June 8, The RBI launched the special USD-INR forex swap facility for FCNR(B) deposits, to absorb the currency-hedging costs faced by banks and encourage NRIs to bring in longer-term foreign-currency deposits.
This article explains how the scheme works, why the RBI uses it and who benefits.
What is a special FCNR(B) deposit scheme?
Before we talk about “special” FCNR(B), let’s talk about the normal one—the plain FCNR(B). It is a fixed deposit for NRIs and people of Indian origin, with one defining feature: the money stays in foreign currency throughout, be it dollars, pounds, euros or yen.
For instance, let’s say you are based in the US and deposit dollars. Your money will be deposited in USD, you will earn interest in that same currency, and you will get the same currency back at maturity. There’s no conversion into rupees.
This gives NRIs a better option. Instead of putting their money into a rupee-denominated deposit, which is exposed to rupee volatility, FCNR(B) deposits keep the money in the same currency, helping them avoid that risk.
The other attraction is that interest is tax-free in India and the money is fully repatriable. Tenures range from one to five years.
That is the baseline product, available year-round. So, what is the special one?
The “special” scheme isn’t a new type of deposit, it’s a regular FCNR(B) deposit, but with one twist: the RBI, not the bank, absorbs the currency risk.
Normally, the bank would have to pay to protect itself against this currency risk. In the 2026 scheme, the RBI took on that cost through the swap.
That made the deposit cheaper for banks to offer. Banks could therefore afford to pay NRIs higher interest rates, roughly 1.5 to 2 percentage points more than usual.
So the basic idea is:
RBI takes on the currency-protection cost → banks save money → banks can offer NRIs higher interest.
The one-year lock-in also means the money cannot be withdrawn immediately, giving the banks a more stable source of foreign currency.
So, in short, the swap between the bank and the RBI is what makes the FCNR(B) deposit “special.”
How the FCNR(B) swap works, step by step
- The bank raises fresh FCNR(B) dollars from NRIs, on a three-to-five-year tenor.
- The bank sells those dollars to the RBI today at the current spot rate, receiving rupees in exchange. The bank now has rupees to deploy and no dollar worry.
- At the end of the swap, the bank buys the same dollars back from the RBI to repay the maturing depositors.
Who benefits from the special FCNR(B) deposit scheme?
NRI depositor: Gets a higher interest rate, while the deposit remains tax-free, repatriable and protected from rupee exchange-rate risk.
Bank: Gets foreign currency that it can convert into rupees and use in India, while the RBI takes care of the hedging cost.
RBI: Gets more foreign currency into the country, strengthening India’s reserves and giving it more room to support the rupee when needed.
Key takeaways
- Special FCNR(B) = a regular foreign-currency NRI fixed deposit + a bank-RBI currency swap that removes the bank’s exchange-rate risk.
- The swap let banks offer rates roughly 1.5–2 percentage points higher than usual in 2026, with a one-year lock-in.
- Depositors keep the core FCNR(B) perks: no exchange-rate risk, tax-free interest in India, full repatriation.
- The RBI’s real goal is rebuilding forex reserves and supporting the rupee.
- The hidden cost is a future redemption cliff when the deposits mature and the dollars flow back out.
Frequently asked questions on special FCNR deposits
What is the special FCNR(B) scheme?
It is a foreign-currency fixed deposit for NRIs, with a special RBI-bank currency swap. This lets banks offer higher interest while the RBI gets more dollars.
Is FCNR(B) interest taxable in India?
No. FCNR(B) interest is tax-free in India. Both the deposit and interest can be fully repatriated. Tax rules in your country of residence may differ.
FCNR(B) vs NRE: what’s the difference?
FCNR(B) stays in foreign currency, so there is no rupee exchange-rate risk. NRE deposits are held in rupees, so their value can change with the exchange rate.
Who can open an FCNR(B) deposit?
NRIs and PIOs can open one. Deposits are available in currencies such as USD, GBP, EUR, JPY, AUD and CAD, usually for one to five years.
Are the special rates always available?
No. The higher rates are available only while the RBI’s special swap window is open. After it closes, rates return closer to normal FCNR(B) levels.
Sources and further reading
- Reserve Bank of India — press releases and notifications on the FCNR(B) swap facility, June–August 2026 https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13468&Mode=0
