NRIs Eyeing High Returns? Ujjivan and DBS Revamp FCNR(B) Deposit Rates

As the Reserve Bank of India (RBI) intensifies its efforts to bolster foreign exchange reserves, Indian banks are aggressively competing for Non-Resident Indian (NRI) capital. Leading the charge, Ujjivan Small Finance Bank and DBS Bank India have announced revised interest rates on Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits to attract stable dollar inflows.

Ujjivan SFB Leads with 7.5% Interest on USD Deposits

In a significant move to capture the NRI segment, Ujjivan Small Finance Bank has hiked its interest rates on USD FCNR(B) deposits. The bank is now offering a competitive 7.50% per annum for the 3-5 year tenure, positioning itself as one of the highest-paying lenders in the industry for this specific category.

Hitendra Jha, Head of Retail Liabilities at Ujjivan Small Finance Bank, noted that this rate enhancement is designed to align with the RBI’s vision of mobilizing stable foreign currency deposits. By offering these competitive yields, the bank aims to encourage greater NRI participation, which in turn contributes to India's long-term financial stability and strengthens the country's external sector.

DBS Bank India Offers Competitive Returns and Digital Ease

Following the same policy direction, DBS Bank India has revised its rates to offer up to 5.6% per annum on USD FCNR(B) deposits for tenures ranging from three to five years. While the rate is lower than Ujjivan's, DBS is focusing on a holistic banking proposition.

DBS highlighted that FCNR(B) deposits are a unique tool for NRIs because they eliminate exchange-rate risk. Since both the principal amount and the interest are repaid in the original foreign currency, investors are protected from the volatility of the Indian Rupee. Furthermore, through its "DBS Treasures" proposition, the bank is offering seamless digital onboarding, allowing overseas Indians to open accounts and invest without the need for a physical visit to India.

Why Banks are Racing for Foreign Currency Inflows

The recent surge in competitive FCNR(B) rates is a direct response to RBI policy initiatives aimed at strengthening India's foreign exchange reserves. By encouraging banks to attract these deposits, the central bank seeks to provide a steady cushion of foreign currency to support the nation's external financing needs.

For the NRI investor, the current landscape presents a strategic window. With global interest rates remaining relatively high, FCNR(B) deposits allow overseas Indians to earn attractive returns on their USD savings while completely bypassing the risks associated with currency conversion at maturity. As competition intensifies between small finance banks and global giants, the NRI segment stands to benefit from increasingly sophisticated and high-yield investment products.

Key Takeaways

  • Aggressive Yields: Ujjivan Small Finance Bank is offering a high-end 7.50% per annum on USD FCNR(B) deposits for a 3-5 year tenure.
  • Risk Mitigation: FCNR(B) deposits allow NRIs to earn interest in foreign currency, effectively eliminating the risk of Rupee depreciation at maturity.
  • Policy Driven: The competitive rate revisions are part of a broader effort to align with RBI's goal of boosting India's foreign exchange reserves through stable inflows.