A S BANKA ADVISORS

There is a fixed date on your desk this quarter that will not appear in any compliance calendar: 30 September 2026. That is when the Reserve Bank’s concessional treatment for fresh FCNR(B) and NRE term deposits stops applying to newly mobilised money.

Most coverage has framed this as a rate story. It is not. The question is not whether to take the rate on the screen. It is whether the tenor you sign up for survives your own residential status over the next five years.

What actually closes

The mobilisation window closes, not the deposits. Anything booked inside it runs for its full contracted tenor.

• FCNR(B): fresh deposits of minimum three year and maximum five year tenor, mobilised between 8 June 2026 and 30 September 2026.
• NRE term deposits: fresh deposits of three years or more, mobilised between 19 June 2026 and 30 September 2026.
• Renewals count. A deposit maturing before 30 September 2026 and renewed for a qualifying tenor is treated as mobilised inside the window.

Why the pricing is genuinely time-limited

Four RBI instruments stack up: the Governor’s Statement of 5 June 2026, the swap facility circular of 8 June 2026 (FMOD.MAOG.No.S-56/01.06.016/2026-27), the CRR and SLR exemptions of 8 June and 19 June 2026, and Circular RBI/2026-27/232 of 7 August 2026.

That last one is the tell, and most commentary skipped it because it reads like plumbing. Reference FIDD.CO.PSD.BC.No.08/04.09.001/2026-27, it excluded advances extended in India against these deposits from Adjusted Net Bank Credit, partially modifying item VI in the table at paragraph 6.1 of the PSL Directions 2025 as updated to 19 January 2026, and deleting foot note 3. The relief is capped at the deposits themselves eligible for the CRR and SLR exemption.

ANBC is the denominator of a bank’s priority sector obligation. Without this amendment, lending against a big new foreign currency deposit book would have raised that obligation and partly cancelled the CRR and SLR benefit. So a bank booking qualifying deposits now keeps no reserve against them, picks up no incremental priority sector obligation on lending against them, and carries no currency risk on the principal because of the swap. Three of the four costs of holding that money are gone, for a defined period. The rate on offer is a function of the window, not the market, and RBI has fixed no rate.

The mistake that actually costs money

It is not missing the window. It is catching the window with the wrong instrument.

NRE interest is exempt only while the depositor is a person resident outside India under FEMA, 1999. That test keys off FEMA status, not the day count used to decide residence for income tax, and the two diverge precisely in the year of a move. Once a person returns to India for employment, business or an indefinite stay, the NRE account must be redesignated as a resident rupee account and interest credited after that point is no longer exempt.

FCNR(B) is more forgiving on two counts: the exemption extends to a Resident but Not Ordinarily Resident, and an existing deposit may generally run to contracted maturity at the contracted rate even after the depositor becomes a resident.

Under the Income-tax Act, 2025, in force from 1 April 2026, Section 11 (“Incomes not included in total income”) excludes income enumerated in Schedules II, III, IV, V and VI subject to the conditions specified there, and provides that where those conditions are not satisfied in any tax year, the income becomes chargeable in that year. Which is the whole point: the exemption is a continuing condition, not a permanent attribute of the deposit. Book five years in September 2026, return to India in year two, and the deposit is still running long after the exemption stopped.

So: project FEMA status and income tax status, including any RNOR period, across every year of the tenor. Then pick the instrument. Then compare quotes, after-tax and after-status across the full term, not on the headline rate.

Two points founders should not miss

You can borrow against the deposit. Indian banks, including their overseas branches, may extend loans to a non-resident or issue a standby letter of credit in favour of overseas lenders against FCNR(B) deposits mobilised under the 8 June 2026 circular, and may mark a lien on the deposit. For an Indian promoter with a non-resident co-founder, investor or family member, that is a real structuring option: non-resident money placed in India with credit support drawn against it, in India or offshore. Price it against the external commercial borrowing route rather than assuming it wins.

The ECB limb runs longer than the deposit limb. The swap facility also covers ECBs and overseas foreign currency borrowings of average maturity three years and above, with swap tenor capped at five years. Per the Reserve Bank’s own FAQ, that limb runs to 31 December 2026, three months past the deposit window. If you are weighing a deposit-plus-credit structure against a straight ECB, the two legs are not on the same clock.

One thing to insist on in writing

Get the lock-in and premature withdrawal terms on the deposit advice, not over the phone. Published sources genuinely conflict on whether a lock-in attaches to deposits under the 2026 facility: some secondary reproductions of the June 2026 circular state a one year lock-in, but that language is also a documented feature of RBI’s earlier 2013 swap window, and the Bank’s current FAQ does not carry a minimum lock-in across for the three to five year tenors here. We will not assert a number we cannot pin down, and neither should your banker. Ask the branch to confirm on the deposit advice both that the deposit qualifies under the relevant circulars and what the withdrawal terms actually are.

What to do before 30 September 2026

1. Identify every affected account now, including deposits maturing before 30 September that could be renewed into the window.
2. Run the FEMA and income tax status projection across the full tenor before looking at a single rate.
3. Choose the instrument that survives it. FCNR(B) where a return to India is plausible inside the tenor; NRE where non-resident status is stable.
4. Get eligibility and withdrawal terms confirmed in writing.
5. Diarise 30 September 2026. There is no announced extension.

Windows like this do not announce themselves to the people who benefit from them. An hour of sequencing is worth several years of differential yield.

Download the full carousel PDF covering the four instruments, the tenor grid, the tax and FEMA layers, and the action sequence.

Need help navigating this?

If you are advising a non-resident client, or deciding on a tenor before 30 September 2026, the status projection is the part worth getting right. Talk to an Expert. Book a quick call: https://calendly.com/asbanka-info/30min

CA Adityavikram Banka, Founder, A S Banka Advisors Private Limited. This note reflects the RBI instruments and statutory provisions as retrieved on 13 August 2026. Deposit terms, eligibility and rates are matters between the depositor and the bank. Residential status under FEMA and under the Income-tax Act must be determined on the facts of each case.