RBI ends FCNR(B) and NRE deposit-rate relaxation early, on 31 August 2026

The Announcement

The Reserve Bank of India has brought forward the expiry of a temporary relaxation on non-resident deposit rates, ending it on 31 August 2026 instead of 30 September 2026. The change was notified on 25 August 2026 through a set of Amendment Directions covering every category of bank - commercial banks (RBI/2026-27/243, DOR.SOG(SPE).REC.211/13.03.00/2026-27), small finance banks, regional rural banks, local area banks, and urban and rural co-operative banks. The rural co-operative banks version carries the reference RBI/2026-27/248.

The relaxation being shortened had two parts, both introduced with effect from 17 June 2026: a "temporary withdrawal of the interest rate ceiling on fresh FCNR(B) deposits of 3-5 year tenors" and a "restriction on interest rates on NRE deposits of 3 year and above tenors", including deposits renewed on maturity. It had been scheduled to run "for the period until September 30, 2026". Per the notification, "it has been decided to amend the date 'September 30, 2026' to the date 'August 31, 2026'".

The Amendment Directions came into force with immediate effect and were signed by Dr Sudarsana Sahoo, Chief General Manager. From 1 September 2026, the standard ceiling on fresh 3-5 year FCNR(B) deposits applies again and the NRE restriction no longer operates.

Why It Changed

The RBI's stated reason is brief. The notification says only that the revised date was set "on a review", and it offers no further explanation for advancing the deadline by one month. Oquilia is not supplying a rationale the release does not give.

What the record does establish is the shape of the measure. The June 2026 relaxation had let banks price fresh FCNR(B) deposits of 3-5 year tenors without the usual interest rate ceiling, while placing a restriction on NRE deposit rates for tenors of three years and above. Both provisions were always time-bound, and the 25 August notification simply moves their end date. The RBI has periodically reviewed such deposit-rate windows, and this notification is the outcome of one such review.

Impact on Borrowers

This notification is a deposit-side measure and does not change any lending rate. It leaves the repo rate, banks' external benchmark lending rates (EBLR) and the marginal cost of funds-based lending rate (MCLR) untouched, so a home loan or personal loan EMI does not move because of it.

It is worth separating the two channels, because readers often conflate them. Loan EMIs respond to the repo rate, which reaches EBLR-linked loans on their reset dates and MCLR-linked loans with a lag. As an illustration of that separate mechanism: on a Rs 50 lakh, 20-year floating-rate home loan, a 25 bps (0.25 percentage points) repo change fully passed through - moving the rate from 8.50% to 8.25% - would take the EMI from about Rs 43,391 to about Rs 42,603, a difference of roughly Rs 788 a month. Those figures are an illustration at an assumed rate, not a consequence of this notification.

Borrowers who want to test their own numbers can use the home loan EMI calculator or, for unsecured borrowing, the personal loan EMI calculator. Nothing in the 25 August Directions requires a borrower to take any action.

Impact on Savers

The people affected are non-resident depositors. Until now, banks could offer fresh 3-5 year FCNR(B) deposits - foreign-currency deposits held by NRIs - above the normal interest rate ceiling, and NRE rupee deposit rates of three years and above sat under a restriction. From 1 September 2026, both provisions lapse: fresh 3-5 year FCNR(B) deposits return to the standard ceiling, and the NRE restriction ends.

The exact rate a bank pays is its own commercial decision within the RBI's framework, so this notification sets no rate itself. FCNR(B) deposits are denominated in foreign currency, and their pricing follows each bank's benchmark-linked ceiling. Deposits already booked during the window run to maturity on their contracted terms; the revised end date applies to fresh deposits from 1 September.

For domestic savers, ordinary rupee fixed deposits are unaffected by this NRI-specific notification. To see how compounding works on a deposit, an illustration helps: Rs 1 lakh in a three-year FD compounded quarterly grows to about Rs 1,21,341 at 6.50% and about Rs 1,22,239 at 6.75%, a difference of roughly Rs 899 over three years. Readers can run their own tenors and rates on the FD calculator.

What Happens Next

The mechanics from here are straightforward. The relaxation runs until 31 August 2026, and the standard deposit-rate framework resumes for fresh FCNR(B) and NRE deposits from 1 September 2026. Deposits contracted during the window keep their agreed rates until they mature.

The RBI publishes these Directions and any future amendments on its website, rbi.org.in, and has shown it reviews such time-bound deposit-rate windows before they expire. Any further change would arrive as a fresh notification on the official record; this desk reports such measures once they are announced, not before.

FAQ

What exactly did the RBI announce?

The RBI advanced the expiry of a temporary non-resident deposit-rate relaxation from 30 September 2026 to 31 August 2026. The relaxation had withdrawn the interest rate ceiling on fresh 3-5 year FCNR(B) deposits and restricted NRE deposit rates for tenors of three years and above. It was notified on 25 August 2026 across all bank categories.

When does the change take effect?

The Amendment Directions took effect immediately on 25 August 2026. The practical cut-off is 31 August 2026: the special provisions apply to fresh deposits only until that date, and the standard framework resumes from 1 September 2026.

Does this change my existing FCNR(B) or NRE deposit?

No. Deposits already booked during the relaxation window keep their contracted interest rate until maturity. The revised end date applies to fresh deposits opened from 1 September 2026, which fall under the standard ceiling and rules.

Does this affect my home loan EMI?

No. This is a deposit-side notification and does not change the repo rate, EBLR or MCLR. Loan EMIs move with the repo rate on reset dates; you can model a repo change on the home loan EMI calculator.

Where can I read the official release?

The notifications are on rbi.org.in. The commercial banks version is RBI/2026-27/243 and the rural co-operative banks version is RBI/2026-27/248, both dated 25 August 2026 and listed on the RBI's notifications page.

This report is based on the official RBI Amendment Directions dated 25 August 2026, published on the RBI notifications page - specifically the commercial banks version and the rural co-operative banks version.