NRI Deposits Fall 40% in H1 FY26 as India–US Interest Rate

Non-Resident Indian (NRI) deposits saw a sharp decline in the first half of FY26, driven largely by a narrowing interest rate differential between India and the United States. According to Reserve Bank of India (RBI) data, fresh NRI deposits collected between April and September 2025 fell to $6.1 billion, a steep 40% drop from $10.2 billion in the same period last fiscal year.

FCNR(B) Sees the Sharpest Decline

The most significant fall occurred in Foreign Currency Non-Resident [FCNR(B)] deposits, where inflows plunged by 87% year-on-year during April–September 2025. July and August even witnessed net outflows, with many NRIs withdrawing funds instead of depositing. Analysts note that with falling returns in these foreign currency accounts, investors shifted capital to alternative assets.

Despite the collapse in FCNR(B) inflows, NRE and NRO deposits remained broadly stable. This resilience is attributed to the weakening rupee, which depreciated 4.5% in 2025, making rupee deposits relatively attractive in currency-adjusted terms.

Economists attribute the overall slowdown to:

Shrinking India–US interest rate differential, reducing the incentive to park money in India.
Sticky inflation and policy uncertainty in the US, affecting disposable income and remittance behavior.
Reallocation of NRI capital, with more investments flowing into Indian equity markets.
Weaker economic conditions in Western countries, especially the US, reducing expat savings capacity.

Madan Sabnavis, Chief Economist at Bank of Baroda, suggests that many NRIs may be channeling more funds into Indian stock markets rather than deposits. Similarly, Madhavi Arora, Chief Economist at Emkay Global, notes that slowing Western economies and narrowing interest spreads will continue to influence NRI flows.

Outstanding NRI deposits stood at $165.9 billion as of September 2025, reflecting a modest 3% increase year-on-year—signalling stagnation rather than growth in this key external funding source.

The trend underscores rising global uncertainties and shifting NRI investment preferences, making deposit mobilization increasingly challenging for Indian banks.