Backed by ZerodhaThe report · FCNR deposits, for Australia & New Zealand
You've probably seen the pitch
FCNR at 6%+ — the highest rates in a decade. Lock yours in.
100% tax-free interest. Zero TDS. Nothing withheld.
No rupee risk. Held in dollars, returned in dollars.
Leverage it for 25% a year. Ask about our facility.
Every claim is somewhat true. But nearly all of it is written for NRIs in the US or the Gulf. This report is a cheat sheet for NRIs living in Australia and New Zealand.
The product, plainly
What it actually is
An FCNR deposit is a fixed deposit with an Indian bank for NRIs, held in a foreign currency instead of rupees — so you get a really good rate without worrying about the rupee depreciating.
| Who can open one | NRIs and OCIs only |
|---|---|
| Term | 1 to 5 years |
| Currencies | USD, AUD, GBP, EUR, JPY, CAD — there is no NZD option |
| Interest | Paid in the same foreign currency you deposited |
| Breaking early | Break before one year and you earn no interest at all |
| Tax in India | Tax-free in India. India withholds nothing |
| Deposit insurance | ₹5 lakh per bank — about A$9,000, or NZ$9,600 |
| Repatriation | Fully repatriable — principal and interest |
| Why it exists right now | The rupee crossed 95 to the dollar and has stayed near record lows, so India needs foreign currency coming in. The RBI is covering about 3% a year of the banks' cost of taking USD deposits, and the banks pass that on as a higher rate. The support ends 30 September 2026. |
What the ads are advertising
The RBI ran this same play in 2013 and pulled in US$26 billion; this time it has drawn about US$17 billion so far, as at 30 July 2026.
The high rate only exists on the 3-to-5 year deposit. That is the one the RBI is paying for.
Source: public bank rate pages (SBI, HDFC, Kotak), June–July 2026.
Who the ad is written for
You're not the NRI in the ad
Almost every FCNR pitch is built for someone in New York or Dubai. That person's situation is not yours, and the difference decides the answer.
The NRI in the ad
Lives in New York or Dubai
Earns in US dollars. Will spend in US dollars. Pays little or no tax on the interest.
For them, a USD deposit is simple — no tax drag, no currency risk.
You
Live in Sydney or Auckland
Earn in AUD or NZD. Will spend in AUD or NZD. Taxed on worldwide income.
For you, the same deposit carries a tax bill and a currency bet.
#1 Thing to consider · The tax you pay at home
The number the ads skip: your tax at home
“Tax-free” means tax-free in India — not for you.
Australia and New Zealand tax you on worldwide income, and FCNR interest is foreign interest. Because India withholds nothing, there is usually no foreign tax credit to offset it, so you pay the full home rate.
What a 6% FCNR is worth after home tax
Every A$100 of interest, split between you and the tax office
Australiamarginal rate up to 45% + 2% Medicare · 39% shown
New Zealandresident income tax up to 39% · 33% shown
A 6% headline is really about 4% once your own tax office is done.
Source: ATO and Inland Revenue guidance on foreign interest income, 2026. Illustrative marginal rates.
Bank executives conceded that tax treatment in certain jurisdictions makes these deposits less attractive — and have targeted the Middle East, Singapore and Hong Kong instead.On who the FCNR push was actually built for
#2 Thing to consider · The US dollar's move
USD vs AUD/NZD has more impact than the rate
The movement of the AUD against the USD will affect your deposit's performance more than almost any other factor.
The Australian dollar has traded anywhere between 55 and 90 US cents over the past decade. Against a swing that size, a percentage point of interest barely registers.
One deposit, three endings
A$100,000 into a 1-year USD FCNR at 4.4%, including FX conversion cost each way
If USD is flat
If USD rises 10%
If USD falls 10%
The exchange rate had a far bigger impact than anything else — including the deposit rate.
Source: illustrative; AUD/USD 10-year range 0.55–0.90 (RBA). Figures as published in the Indus FCNR research note.
An unhedged USD FCNR is — whether you meant it or not — a bet that the US dollar will rise against your home currency. And history has a view on how that has actually gone.
FCNR vs a local term deposit in your home currency
Total return, back-calculated to July 2026 · %
Nothing here says the dollar has to keep rising. The same table with a falling dollar flips every row against the FCNR — and that outcome is every bit as plausible as this one.
FCNR only won the longer races because the US dollar happened to rise over those years — not because the rate was better. Over three years, when it didn't, the boring local deposit won.
Source: Indus analysis using RBA and RBNZ series; assumes 4% USD FCNR, unhedged, pre-tax.
AUD-denominated FCNR deposits do exist, which removes the USD leg entirely — but at meaningfully lower rates. There is no NZD option at all.
The one number that matters
Calculate potential returns
The advertised rate is where the calculation starts, not where it ends.
Your home tax office takes a share, and the exchange rate moves. Set your own numbers and see what actually reaches you.
What the ad says
a year, before anything is taken out
What you actually keep
a year, after home tax and currency
Even with the dollar perfectly flat, an advertised 6.25% is really 3.9% a year in your hand over 5 years. Move the slider and watch the currency matter more than the rate ever did.
Assumes a 0.9% round-trip currency conversion cost. Interest and any FX gain are treated as assessable at your marginal rate, and tax is applied only where there is a gain. Interest compounds annually and the rate is assumed to hold for the whole term. Not tax advice.
The other side of the trade
When everyone zigs, you could zag
An FCNR keeps your money in dollars. That means if the rupee recovers, you don't participate.
One simple gauge tells you whether the rupee is genuinely cheap or just low: the REER index — the rupee's fair-value score, set to 100. Below 100 is cheap. Above 100 is expensive.
Is the rupee actually cheap?
India's real effective exchange rate (REER) — inflation-adjusted, 2020 = 100
Source: REER, BIS broad basket (64 economies), 2020 = 100. Shape indicative of the published series.
On the REER index today, the rupee is undervalued against the US dollar. HDFC fund manager Ashish Jagnani, in a webinar for Indus customers, read that weakness as driven by flows rather than fundamentals.
If that's right, buying rupee assets now gives you two tailwinds — the investment recovering, and the rupee recovering with it. An FCNR gives you neither, because your money sits in dollars either way.
The aggressive version
The leverage pitch, decoded
A number of banks are now advertising FCNR returns of 15% and even 20% a year. Those numbers are real, but they are not what the deposit pays.
The deposit itself still pays roughly 5% to 7%. The bigger number comes from the bank lending you a large sum on top of your own money, so the same small margin is earned on a much larger deposit. It's worth understanding exactly how that is built before you judge it.
Here is the whole thing, at the smallest scale that shows it.
Where the "15%" actually comes from
You put in US$100. The bank lends you US$900 against it · simplified
1The position — 90% of it is the bank's money
Total FCNR deposit position: US$1,000
2The return — a 1% spread, earned on all US$1,000
US$15 on US$100 gets advertised as “15%”. The deposit itself still only paid 6%.
You hold a US$1,000 deposit — but you owe the bank US$900 of it. Here is what that looks like when the banks actually offer it, at real size.
| Bank & structure | How the leverage works | Reported economics | The catch |
|---|---|---|---|
| SBI leveraged FCNR | Customer contributes US$1m; SBI reportedly lends up to US$9m, creating a US$10m deposit position. | Five-year deposit 6%. Loan 5.4%. Reported return on your capital: 14.08% | The facility reportedly starts at US$1m. SBI's public page confirms the 6% rate, the 3–5 year term and the one-year lock-in, but does not set out the leveraged term sheet. |
| HSBC GIFT City | Customer contributes US$100,000 and can reportedly borrow US$900,000 or US$1.9m — a total position of up to US$2m. | Deposit 5.5%. Loan reportedly 5.15% (3yr) or 5.05% (5yr). Reported range: 8.77%–14.25% | Offered on a “reverse enquiry” basis rather than advertised. Premature closure can attract a 4% charge on the gross deposit — on US$2m that is US$80,000, or 80% of your original US$100,000. |
| IDBI structured facility | Minimum contribution reportedly US$50,000, with borrowing of up to 12× your contribution. | Deposit up to 6.60%–6.70%. Indicative loan 5.80%–5.90%. Indicative return: up to 16.2% | Interest is payable semi-annually and loan principal is reportedly due at maturity. Leverage and return figures come from offer documents, not a full public term sheet. |
Publicly reported structures, June–July 2026. Figures come from bank pages and offer documents reviewed by the press, not from complete public term sheets. Indus is not affiliated with any bank listed.
Things to watch out for
The spread can shrink
Your deposit may be fixed, but the loan rate can rise. Any repricing, fee or extra charge eats directly into a very thin difference.
Exit charges hit the gross
Fees can be calculated on the entire position, not just your own money. On a US$2m position, a 4% break fee is US$80,000.
Tax applies to the full interest
The advertised return is normally before tax — and reporting can apply to the whole interest earned, not your share of it.
Insurance does not multiply
A larger deposit position does not buy proportionately more protection. Cover may differ again for deposits booked through GIFT City units — where there is none.
Your currency risk remains
The borrowed dollars are largely matched against dollar deposits. Your own capital is still exposed to USD against the currency you actually spend.
Put those together and the picture flips. Every factor we've already been through — your home tax, and the US dollar moving against your own currency — still applies here, except now it is working on a position ten or twenty times the size of the money you actually put in.
A currency move that would have cost you a few percent on an ordinary deposit can wipe out the whole spread on a leveraged one. And if you need your money back early, the exit fee is charged on the entire position, not on your share of it.
When it runs in reverse
Charges land on the gross position — not on the part that was yours
Leaving early once can cost 80% of everything you contributed — and you still owe the loan.
This is not a 15% fixed deposit. It is a leveraged loan-and-deposit trade, packaged to look like one.
The return looks high because the loan is enormous, not because the deposit is exceptional.
The rate board
Who's paying the best FCNR rates
The peaks sit exactly in the 3-to-5 year bucket the RBI is subsidising.
| Indian bank | 1 year | 3–5 years |
|---|---|---|
| Kotak Mahindra | 3.50% | 6.25% |
| HDFC Bank | 3.50% | 6.00% |
| SBI (special) | n/a | 5.25% – 5.75% |
| SBI / Union (standard) | 4.40% | ~3.05% |
Source: public bank rate pages, June–July 2026. Rates change often — verify with the bank before acting.
Remember insurance stops at ₹5 lakh — about A$9,000 — however large the deposit. GIFT City offers foreign-currency deposits with more flexible tenures and no deposit insurance at all.
If you go ahead
Before you commit
- You'll need NRI or OCI status, and the documents to prove it.
- A bank that supports remote video KYC — the large private banks do.
- Funding by SWIFT. Watch the FX conversion, which can quietly cost 2 to 3% and eat a third of your return.
- Lock in for 3 to 5 years to get the subsidised rate. Break before one year and you earn no interest at all.
And ask the bank, plainly
- 1
The exact rate for my currency and my tenure — not the headline.
- 2
The cost of an early exit, and whether it is charged on my money or on the gross position.
- 3
The FX spread, both ways, in basis points.
- 4
Whether the deposit is DICGC-insured — and if it's booked through GIFT City, say so.
- 5
My options at maturity, and what the renewal rate is likely to be once the subsidy lapses.
Where Indus fits
If you're looking to invest in India's markets seamlessly from Australia or New Zealand, you can invest with Indus. Learn more