With the August 31, 2026 deadline for the RBI’s special FCNR mobilisation window just days away, NRIs are rushing to lock in rates far above what these deposits have offered in years — some banks are quoting 5.5% to 7.4%, against the usual 2–4%. But the rush to book before the window shuts is exactly when the fine print gets skipped: deposits booked in this period for a 3–5 year tenure come with a mandatory 1-year lock-in, and the deadline itself has already been pulled forward once, from September 30 to August 31. Before you book a special FCNR deposit in these final days, here’s what actually matters beyond the headline rate
Interest rate
Check the rate for your tenure and deposit size. Banks may advertise their highest rate for a specific tenure or deposit slab, while a lower rate applies to your deposit.
Compare the FCNR rate with the rate available for the same currency in its home market. Also compare it with a similar NRE rupee deposit. NRE deposits generally offer higher nominal rates, but they carry rupee exchange-rate risk.
Find out which bank offers highest interest rate on special FCNR deposit scheme
Tenure
Check whether you can keep the money deposited for three to five years. Special FCNR deposits generally have multi-year tenures.
Consider when you will need the money and in which currency. A five-year deposit keeps you at the agreed rate for the full tenure. You may receive less than a new deposit rate if market rates rise during that period.
Currency
Choose a currency that matches your expected future spending where possible. For example, a dollar earner who expects to spend the money in dollars can avoid converting the deposit into rupees.
If you convert the deposit into rupees at maturity, the final amount in rupees will depend on the exchange rate at that time. The deposit then carries exchange-rate exposure against the rupee.
Minimum deposit
Check the minimum deposit required for the advertised rate. Some preferential rates apply only above a specified deposit amount. A lower rate may apply below that threshold.
Read the rate table for your deposit slab rather than relying on the headline rate.
Premature withdrawal rules
Under the current scheme, FCNR deposits cannot be withdrawn during the first 12 months.
After 12 months, the bank generally pays interest at the lower of the contracted rate or the rate applicable to the period for which the deposit was held.
Check the bank’s premature withdrawal terms before booking the deposit. Keep enough funds outside the FCNR deposit for expenses during the first year.
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Interest payout frequency
Check whether the deposit pays simple or compound interest and how often the interest is paid. Banks may offer cumulative and non-cumulative options with different payout schedules.
If you do not need regular interest income, compare the cumulative option with the available payout options. If you need regular income, check whether the bank pays interest monthly, quarterly, half-yearly, or at maturity.
Repatriation
FCNR principal and interest are freely repatriable. Check the bank’s process and documentation requirements before maturity.
The required documents can depend on how the funds are being transferred and the account through which they are sent.
Renewal terms
Check the rate that will apply if the deposit is automatically renewed. A special rate offered for the original deposit may not apply after renewal.
Note the maturity date and check the renewal rate before the deposit matures. The bank’s prevailing rate at renewal can be different from the rate on the original deposit.
Deposit insurance
The Deposit Insurance and Credit Guarantee Corporation (DICGC) insures deposits up to Rs. 5 lakh per depositor per bank. The limit covers principal and interest across eligible deposits held with that bank.
For amounts above Rs. 5 lakh, the excess is not covered by DICGC insurance. Check the bank’s financial position and consider how much of your total deposits is held with each bank.
Leveraged structures
Some institutions offer FCNR-linked products that use borrowed funds to create a larger deposit position. The quoted return may be calculated on the leveraged amount rather than the investor’s own capital.
These products can involve borrowing costs, margin requirements, and the possibility of having to add funds or close the position. Products offered through an offshore or IFSC unit may also have a different regulatory framework from a domestic FCNR deposit.
A leveraged FCNR-linked product has different risks and terms from a standard FCNR deposit. Check the borrowing terms, margin requirements, regulatory framework, and investor protections before investing.
FAQs on special FCNR deposit scheme
What is a special FCNR deposit?
It is a foreign-currency deposit for NRI depositors with a preferential interest rate. Special FCNR deposits are generally offered for three to five years. The RBI can temporarily change the interest-rate ceiling for FCNR deposits.
How is an FCNR deposit different from an NRE deposit?
An FCNR deposit is held in a foreign currency. The deposit does not have rupee exchange-rate exposure while it remains in that currency. An NRE deposit is held in rupees and can offer a higher interest rate, but its foreign-currency value changes with the rupee exchange rate.
Can I withdraw a Special FCNR deposit before maturity?
No withdrawal is permitted during the first 12 months. After 12 months, the bank generally pays the lower of the contracted rate or the rate applicable to the period for which the deposit was held.
What happens if I do not withdraw or renew the deposit at maturity?
The deposit may be renewed at the bank’s prevailing rate under its renewal terms. The special rate on the original deposit may not apply after renewal. Check the bank’s renewal terms before maturity.
Is my FCNR deposit fully insured?
DICGC insurance covers up to Rs. 5 lakh per depositor per bank for eligible deposits, including principal and interest. Amounts above the insured limit are not covered by DICGC insurance.
Are leveraged FCNR-linked products the same as a regular FCNR deposit?
No. Leveraged products use borrowed funds and can involve borrowing costs and margin requirements. Products offered through offshore or IFSC units can also have different regulatory terms from a domestic FCNR deposit. They should be assessed separately from a standard FCNR deposit.
