RBI’s rate ceiling withdrawal sparks FCNR deposit rush: Indian Bank targets $2 billion

The Reserve Bank of India’s decision to withdraw the interest rate ceiling on fresh FCNR(B) deposits with maturities of three to five years, effective until September 30, 2026, has triggered a rush of inflows at Indian Bank, which is now targeting $2 billion in foreign currency non-resident deposits.

Indian Bank MD and CEO Binod Kumar said in Chennai on Friday that the public sector lender has seen a sharp spurt in FCNR(B) deposits over the past 25 days. ‘So far, we have secured $140 million between June 15 and July 9. We plan to raise around $2 billion by September this year. We already have a pipeline of $1 billion,’ he said.

The $2 billion target is more than four times the bank’s total FCNR(B) deposit mobilisation in FY26, when it raised $457 million, and Kumar said it would be among the highest such mobilisation the bank has achieved under the scheme.

To capture the opportunity created by the RBI’s relaxation, Indian Bank has raised the interest rate on FCNR(B) deposits to 6% from 5.5%, translating into an annualised return of around 13%-14% for depositors.

The bank’s push for foreign currency deposits comes alongside strong quarterly results: Indian Bank posted a 10% rise in net profit to Rs 3,273 crore in the first quarter, compared with Rs 2,973 crore a year earlier, helped by an increase in yield on advances and strong growth in net interest income.