📚 New to this topic? Read our full guide: RBI Repo Rate Explained.

RBI’s New FCNR(B) Rules: Why the 2013 Leverage Magic May Not Work for NRIs in 2026

The RBI has made new rules to bring in dollars from Indians who live in other countries. These rules are about a kind of bank account called FCNR(B). FCNR(B) means Foreign Currency Non-Resident (Bank). It is a bank account where an NRI keeps money in dollars, not in rupees. An NRI is a Non-Resident Indian — an Indian person who lives in another country.

The big topic is “leverage.” Leverage means you borrow cheap money so you can invest a bigger amount. In 2013, this trick made some NRIs a lot of money. But in 2026, experts say the trick mostly does not work anymore. Here is the simple math.

What the RBI actually changed

The RBI is the Reserve Bank of India. It is the country’s central bank — the main bank that controls money and other banks. The RBI made two changes.

First, on June 8, 2026, it started a “Swap Facility” for FCNR(B) deposits. A swap here means the RBI takes on a risk for the banks. The risk is that the rupee may lose value against the dollar. The RBI agrees to cover that risk, so the banks do not lose money. But the RBI only covers the main amount (called the principal). It does not cover the interest.

Second, on June 18, 2026, the RBI removed the limit on interest rates. Before, there was a top limit. Now banks can offer NRIs any rate they want on these dollar deposits. The reason is simple: India wants more dollars to come in.

Why India needs these dollars now

The dollars coming into FCNR(B) accounts have dropped a lot. In the year 2025-26, only $946 million came in. The year before, in 2024-25, it was $7 billion. The monthly numbers show the same drop. In April 2025, $272 million came in. But in April 2026, it fell to $166 million. This big fall is one reason the RBI started the new plan.

Bankers hope the new rules will bring in $35 billion to $50 billion this time. In 2013, a similar plan brought in about $26 billion.

The 2013 vs 2026 leverage math, explained simply

Again, leverage means borrowing extra money to make your investment bigger. There is also a word called “spread.” A spread is the gap between what you earn and what you pay to borrow. In 2013, this gap was very big. So the deal was almost free money.

Sneha Pandey explained this. She is a Fund Manager for Fixed Income at Quantum AMC. A fund manager is a person who invests money for others. “The math on leverage has completely changed since 2013, and that is the most important fact investors need to understand,” she said.

Back in 2013, the US Federal Reserve (the central bank of the United States) kept interest rates near zero. So an NRI could borrow dollars abroad for just 1% to 1.5%. Then they put that money in an FCNR deposit that paid 5.5% to 6%. That left a gap of more than 4%. In finance, people also write this as 400+ bps. “Bps” means basis points. 100 bps is the same as 1%. With 5 times to 10 times leverage, the returns were very big.

In 2026, borrowing dollars abroad costs about 5.5% to 6%. If the FCNR deposit pays 6.5% to 7%, the gap shrinks to about 1% (around 100 bps). So the free money is gone.

A simple 5x example

Sneha gave an example. Say you put in $100,000 of your own money. Then you borrow $400,000 more. Now you have a $500,000 deposit that earns 7%. With a gap of just 1%, you make about $5,000 extra. That looks like a 5% return on your own money.

But there is a catch. The money you borrow is often “floating-rate.” Floating-rate means the rate can go up or down over time. If your borrowing cost rises by just 1%, the loan now costs 7%. Then the gap disappears. You are left with big risk and no extra reward.

Key facts

Item20132026
FCNR(B) money raised~$26 billion$35–$50 billion (hoped)
Cost to borrow dollars abroad1%–1.5%5.5%–6%
FCNR deposit yield5.5%–6%6.5%–7%
Net spread (the gap)400+ bps~100 bps
3-year rate gap (India vs US)8.0%2.1%
5-year rate gap—2.2%

What it means: the big gap that made leverage easy in 2013 has almost vanished. Dr. Soumya Kanti Ghosh explained the bond side. He is the Group Chief Economic Adviser at State Bank of India. A bond is a kind of loan you give to a government, and it pays you interest. In 2013, a 3-year Indian government bond paid about 8.9%. A US 3-year government bond (called a treasury) paid only 0.9%. That was a gap of 8.0%. Today that 3-year gap has fallen to just 2.1%.

FAQ

Can NRIs still use leverage on FCNR deposits?

Yes. Indian banks and their branches abroad can lend money to NRIs against these deposits. They can also give a Standby Letter of Credit. That is a bank promise to pay an overseas lender if the borrower cannot. GIFT City banks (banks in a special finance zone in India) cannot take FCNR deposits, but they can give loans to NRIs. So the option still exists. But the reward is much smaller now.

What is the main risk?

The deposit pays a fixed rate, which stays the same. But the loan is often floating-rate, which can change. If global borrowing costs rise even 1%, your whole profit can disappear. As Sneha put it, the deal is now “an asymmetric risk trade.” That means the risk is not balanced — you can lose much more than you gain. She said it is really a big bet on the economy dressed up to look like a safe deposit. It is not free money.

Why it matters, especially for India and NRIs

India wants these dollars for two reasons. They help support the rupee and build up the country’s reserves (its saved-up money). The banks and the wider system gain when dollars come in. But the investor carries most of the risk from the leverage. For the plan to really work, banks will need to offer much higher rates.

So far, most banks raised rates after June 8. But they have not pushed rates up much after the June 18 change that removed the limit. The RBI has asked banks to send dollar deposit data every day from June 22. But that data is not public yet.

For business founders and finance teams in India, this is a good reminder. A new policy can open a door, but it cannot force people to walk through it. This change sits next to the RBI’s other recent steps, such as its new rules on credit on UPI and opening the money market to NBFCs. Together they are part of a bigger push for reform and easier money flow.

Bottom line: the 2013 deal worked because money was cheap and the gap was wide. The 2026 version has a thin gap and floating-rate loans. NRIs who hope for the old magic should check the math first. The easy profit is over.

Source: Financial Express — RBI’s New FCNR(B) Rules and the NRI leverage math.

Related coverage

Get the day’s top stories in your inbox

One concise email. No spam, unsubscribe anytime.