HDFC and ICICI Bank Raise FCNR Deposit Rates to 6.25% for NRIs

The race for foreign currency inflows has intensified as India’s largest private lenders adjust their offerings to capture dollar deposits before a critical regulatory window closes. By raising rates on select FCNR (B) tenures, HDFC and ICICI are responding to both a government subsidy on hedging and a hardening global interest rate environment.

HDFC and ICICI Bank Interest Rate Revisions

Both institutions have pushed their peak rates to 6.25% for deposits in the three-to-five-year bracket, though the eligibility and application of these rates differ between the two banks. HDFC Bank implemented its revised rates on August 1, 2026, applying the 6.25% return uniformly across tenures of three to less than four years, four to less than five years, and exactly five years.

ICICI Bank’s strategy is more tiered. According to reports from money9live.com, the 6.25% rate is reserved for deposits of USD 400,000 or more for tenures between 36 and 60 months. For deposits below this threshold, the interest rate for the same period remains at 6.00%.

Tenure	HDFC Bank Rate	ICICI Bank (USD < 400k)	ICICI Bank (USD ≥ 400k)
1 to < 2 Years	3.50%	3.85%	3.85%
2 to < 3 Years	3.25%	3.85%	3.85%
3 to 5 Years	6.25%	6.00%	6.25%

The RBI Hedging Relief and the September 30 Deadline

This pricing shift isn’t arbitrary. In June 2026, the Reserve Bank of India stated that the government would absorb the hedging costs for FCNR (B) deposits with maturities between three and five years. This relief is a temporary measure, expiring on September 30, 2026.

The urgency is driven by the need to mobilize foreign exchange. Data from authorized dealer banks shows that FCNR (B) deposits are the dominant vehicle for these inflows. As of July 31, 2026, FCNR (B) deposits totaled USD 36,725 million, dwarfing Overseas Foreign Currency Borrowings (OFCBs) at USD 2,575 million and External Commercial Borrowings (ECBs) at USD 1,516 million.

RBI Updates Fixed Deposit Rules With Flexible Bulk Rates Effective October 2026

Beyond the government subsidy, banks are battling a global trend of rising benchmark rates. A senior private sector bank executive noted that these tweaks are necessary to remain competitive as overseas borrowing becomes more expensive.

A senior private sector bank executive, via Economic Times, stated that the tweaks are required to keep rates competitive, which is what large banks have done.

Lock-in Periods and Premature Withdrawal Penalties

The higher yields come with stricter liquidity constraints. Both banks have introduced a one-year lock-in period for deposits booked between June 10 and September 30, 2026, specifically for those with tenures of three to five years.

For HDFC Bank, withdrawing these funds before the one-year mark results in no interest being paid, although the bank does not levy a penalty for the closure. ICICI Bank’s rules are more granular. For deposits with an original tenure of 12 to 36 months, no interest is paid if closed before one year.

Market Competition and the Global Dollar Demand

While HDFC and ICICI are leading the charge among the giants, they aren’t the only ones moving. AU Small Finance Bank has adjusted its peak rate on 3-to-4-year FCNR (B) deposits. Meanwhile, SBI continues to offer 6% on five-year deposits of significant value.

The pressure on Indian banks is compounding. US Treasury yields have climbed—the five-year treasury rose to 4.45% from 4.15% in June 2026, and the 10-year security hit 4.74% from 4.48% in the same window. This environment makes it more expensive for Indian banks to source dollars through bonds or loans, forcing them to offer more attractive rates to NRIs to attract “sticky” retail deposits.

A foreign bank executive highlighted that while money is available, the premium demanded by bond investors means banks must pay higher rates, a gap they are filling by tweaking their offering before the September 30 window closes.

For the NRI investor, the appeal remains the combination of tax-free interest in India and the elimination of exchange rate risk, as funds are maintained in original foreign currencies. The primary uncertainty now is how these rates will shift once the government’s hedging support ceases at the end of September.