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

The Announcement

The Reserve Bank of India has brought forward the end of a temporary relaxation on interest-rate ceilings for two categories of non-resident deposits. In the Reserve Bank of India (Commercial Banks - Interest Rate on Deposits) Third Amendment Directions, 2026, notified on 25 August 2026 (reference RBI/2026-27/243, DOR.SOG(SPE).REC.211/13.03.00/2026-27), the RBI amended paragraphs 27(4) and 32(7) of its deposit directions by substituting the closing date of the relaxation window from "30 September 2026" to "31 August 2026".

The relaxation, which took effect from 17 June 2026, had temporarily withdrawn the interest-rate ceiling on fresh FCNR(B) deposits of three to five year tenors and lifted the restriction on interest rates for NRE deposits of three years and above, including renewals. The change takes immediate effect, and the RBI issued parallel amendments the same day for small finance banks, local area banks, regional rural banks, and urban and rural co-operative banks, so the revised end date applies across the banking system.

Why It Changed

The notification gives a deliberately brief rationale. It states only that "on a review" the Reserve Bank decided to amend the end date of the relaxation. The document does not elaborate further on the reasoning.

For context on the record, the relaxation being shortened was itself introduced with effect from 17 June 2026 as an amendment to the Reserve Bank of India (Commercial Banks - Interest Rate on Deposits) Directions, 2025 dated 28 November 2025. That measure had allowed banks to offer higher interest on the specified NRE and FCNR(B) deposits by suspending the usual ceilings. The 25 August amendment restores the standard ceilings from 1 September 2026 rather than 1 October.

Impact on Borrowers

This is a deposit-side measure. It does not change the policy repo rate, nor does it touch the external benchmark lending rate (EBLR) that prices floating-rate home loans, so EMIs on EBLR-linked loans are not moved by this notification. Loans priced off the marginal cost of funds based lending rate (MCLR) are equally unaffected.

It is worth understanding the mechanism the notification leaves untouched, because it is where any future rate change would land. On a floating-rate loan, a change in the benchmark reaches the EMI only on the loan's reset date, and MCLR-linked loans move with a lag. As an illustration of the arithmetic, on a Rs 50 lakh, 20-year home loan, a 25 bps (0.25 percentage points) move in the applicable rate, from an indicative 8.50% to 8.25%, changes the EMI from about Rs 43,391 to about Rs 42,603 - roughly Rs 788 a month. Those figures illustrate how repricing works, not an effect of this notification.

Readers who want to see how their own loan would respond to a benchmark change can run the numbers on the home loan EMI calculator, and, for unsecured borrowing, the personal loan EMI calculator.

Impact on Savers

The direct effect falls on non-resident savers. From 1 September 2026, fresh FCNR(B) deposits of three to five years and NRE deposits of three years and above, including renewals, come back under the standard interest-rate ceilings, which cap NRE rates so they are not higher than those on comparable domestic rupee deposits. During the relaxation window some banks had scope to offer above-ceiling rates on these deposits; from 1 September that scope is withdrawn for new and renewed deposits. Deposits already booked at a contracted rate continue to earn that rate until maturity, as fixed-deposit contracts are locked at the time of booking.

To see what a difference in the offered rate means in rupees, consider an NRE fixed deposit of Rs 1 lakh for three years, compounded quarterly. At an indicative 7.00% the deposit matures at about Rs 1,23,144, earning roughly Rs 23,144 in interest; at 6.50% it matures at about Rs 1,21,341, earning about Rs 21,341 - a difference of around Rs 1,803 over the three years (illustration, using indicative rates). The actual rate any bank offers is its own commercial decision, within the ceiling. Resident domestic deposits are not affected by this amendment. Savers can test their own tenor and rate on the FD calculator.

What Happens Next

The amendment is in force now, and the operative consequence is dated: from 1 September 2026 the standard ceilings apply to fresh and renewed NRE deposits of three years and above and to fresh FCNR(B) deposits of three to five years. Banks will reprice their new offers on these deposits accordingly; existing deposits run to maturity on their contracted terms.

Transmission on the deposit side is a commercial matter for each bank, so the pace of any change in advertised NRE and FCNR(B) rates differs from lender to lender. The full text of the directions, and the Reserve Bank's bi-monthly monetary policy calendar, are published on the RBI website.

FAQ

What exactly did the RBI announce?

The RBI notified the Third Amendment Directions, 2026 on 25 August 2026, moving the end date of a temporary interest-rate-ceiling relaxation on NRE deposits of three years and above and fresh FCNR(B) deposits of three to five years. The window, originally set to run until 30 September 2026, now closes on 31 August 2026.

When does the change take effect?

The amendment took immediate effect on 25 August 2026. Its practical consequence lands on 1 September 2026, when the standard ceilings resume for fresh and renewed NRE deposits of three years and above and fresh FCNR(B) deposits of three to five years, in place of the relaxed regime that had been due to run to 30 September.

Does this change my home loan EMI?

No. This is a deposit-side measure. It does not alter the policy repo rate or the external benchmark lending rate that prices floating-rate home loans, so EBLR-linked and MCLR-linked EMIs are unaffected. You can model how any future benchmark change would reach your EMI on the home loan EMI calculator.

Does it affect my existing NRE or FCNR(B) deposit?

No. Deposits already booked earn their contracted rate until maturity, because fixed-deposit rates are locked at the time of booking. The amendment applies to fresh FCNR(B) deposits and to fresh or renewed NRE deposits made from 1 September 2026, which return to the standard ceilings.

Are resident fixed deposits affected?

No. The amendment concerns only NRE and FCNR(B) deposits, held by non-residents. Interest rates on ordinary resident domestic fixed deposits are unchanged by this notification and remain each bank's commercial decision within the applicable rules.

Where can I read the official release?

The notification is published on rbi.org.in as the Reserve Bank of India (Commercial Banks - Interest Rate on Deposits) Third Amendment Directions, 2026, reference RBI/2026-27/243 dated 25 August 2026. Parallel amendments for other bank categories were issued the same day.

This report is based on the official RBI Third Amendment Directions dated 25 August 2026. It was surfaced via coverage aggregated on Google News.