Good news for those earning abroad! HDFC and ICICI Bank have raised interest rates on FDs..

There is excellent news for Indians working abroad. Two of the country's major private banks—HDFC and ICICI—have raised interest rates on Fixed Deposits (FDs) for Non-Resident Indians (NRIs). This hike specifically applies to Foreign Currency Non-Resident (FCNR) deposits. This essentially means that NRIs can now earn higher, tax-free returns by keeping their foreign earnings in Indian banks. The best part is that there is no risk associated with currency exchange rate fluctuations between the dollar and the rupee.

**The Real Reason Behind the Rate Hike**
The banks did not make this decision in isolation; it stems from a significant relief measure introduced by the Reserve Bank of India (RBI). In June, the RBI decided that the government would bear the 'hedging cost' (the cost associated with currency fluctuations) for foreign currency FDs with tenures of three to five years, up to September 30 of this year. Since the banks saved on this expense, they decided to pass the benefit directly to their customers. Consequently, both banks have increased their interest rates by 0.25%.

**Calculating Returns on HDFC Bank Investments**
HDFC Bank implemented its new rates starting August 1, 2026. Now, if you place funds in a fixed deposit for a tenure of 3 to 5 years, you will earn a substantial interest rate of 6.25%. For shorter tenures, the interest rate is set at 3.50% for 1 to 2 years and 3.25% for 2 to 3 years. The bank has also clarified that any 3-to-5-year FD opened between June 10 and September 30, 2026, will carry a one-year lock-in period, meaning the funds cannot be withdrawn during that first year. If you book the FD via net banking, it may take two working days for it to become active.

**ICICI Bank's New Rates**
ICICI Bank has also revised its rates effective from August 3, 2026. This bank offers an interest rate of 6.25% on 3-to-5-year Fixed Deposits (FDs), provided the deposit amount is $400,000 or more. If the deposit amount is less than $400,000, the return for the same tenure is 6.00%. Meanwhile, the bank offers an interest rate of 3.85% on FDs with tenures ranging from 1 to 3 years.

Rules for Premature Withdrawal
ICICI Bank has also clarified the rules regarding premature withdrawals. For FDs with tenures of 1 to 3 years, no interest is payable if the funds are withdrawn before the completion of 12 months. If the withdrawal takes place after 12 months, the applicable interest is paid, and no penalty is levied. However, the rules are somewhat stricter for longer-term FDs (3 to 5 years). These also carry a one-year lock-in period; if you break the FD after the completion of one year, the bank deducts a 1% penalty and pays interest based on the actual duration the funds remained deposited.

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