RBI looks to revive NRI deposit growth through FCNR(B) route, NRO accounts grow fastest: Bank of Baroda report

The Reserve Bank of India (RBI) is making a bold play to shore up India's foreign currency inflows, announcing a special forex swap facility that effectively eliminates hedging cost for banks raising fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits until September 30, 2026. This move, aimed at reviving NRI deposit growth which largely flatlined in FY26, has already seen major banks like Bank of Baroda, Canara Bank, and HDFC Bank offer attractive interest rates as high as 7.1% on USD deposits. Simultaneously, a recent Bank of Baroda report reveals a significant underlying shift: Non-Resident Ordinary (NRO) account are quietly emerging as the fastest-growing segment among NRI deposits, driven by increasing domestic income streams. This urgent push comes as India's foreign exchange reserves saw a notable dip of nearly $10 billion in the week ending June 12, 2026, highlighting the central bank's focus on bolstering its currency buffer. While the RBI 2013 FCNR(B) scheme, which also absorbed hedging cost, dramatically boosted inflows, the current landscape is more complex; higher US interest rates mean Indian banks need to offer a more compelling spread to attract foreign capital. The rapid growth in NRO accounts, largely fed by rental income, dividends, and asset sales within India, suggests a deeper confidence among NRI in India's domestic economy, even as foreign currency inflows have slowed. Analysts are cautiously optimistic, with estimates for fresh FCNR(B) inflows ranging from $30 billion to $70 billion by the September 30 deadline. The success of this initiative will be crucial not only for boosting foreign exchange reserves and supporting the Indian Rupee but also for indicating how effectively the RBI can adapt its strategies to evolving global and domestic financial dynamics. All eyes will be on whether the attractive rates and zero currency risk for depositors are enough to reignite substantial NRI interest beyond the current surge in NRO accounts.