SBI revises FCNR(B) interest rates up to 5.75%: NRIs, OCIs & POIs can earn more on these deposits

The State Bank of India (SBKFF) has raised foreign currency non-resident (FCNR(B)) deposit rates to as high as 6% annually following the Reserve Bank of India's decision to absorb hedging costs. This policy shift reduces SBI's structural cost of funding foreign exchange liabilities, improving deposit competitiveness for non-resident Indians, overseas citizens, and persons of Indian origin without increasing the bank's net funding expenses.

The rate revision reflects a targeted capital allocation strategy aimed at retained NRI deposit flows, a historically stable funding source for Indian banks. By offering tax-exempt returns coupled with currency risk protection, SBI seeks to defend market share in a competitive NRI banking segment while maintaining profitability through RBI's cost subsidy mechanism. Tenure and denomination variations suggest segmented pricing discipline.

From a macroeconomic perspective, this move supports RBI's dual objectives: strengthening foreign exchange reserves through inbound NRI remittances and enhancing financial inclusion for diaspora populations. The policy externality—lower hedging costs—artificially compresses Indian bank funding rates for foreign currency products, potentially distorting cross-border capital flows if sustained long-term.

Sector implication: The announcement is marginally positive for Financial Services but geographically concentrated to India. For US-listed equities or global banking indices, the impact is negligible. SBKFF's modest response reflects the niche nature of NRI deposit competition and muted earnings accretion relative to domestic retail franchise size.