FCNR(B) Deposit Rates Shift from LIBOR to ARR with 50 bps Hike
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2021-2022/123 · issued 11 Nov 2021 · ~2 min read
Quick answerRBI permits banks to use Overnight Alternative Reference Rates (ARR) instead of LIBOR for FCNR(B) deposits, and raises interest rate ceilings by 50 bps across tenors. This aligns with the global LIBOR transition and aims to ease rate-setting for banks.
What changed
RBI replaced LIBOR with Overnight Alternative Reference Rates (ARR) as the benchmark for fixing FCNR(B) deposit interest rates. The interest rate ceiling for fixed-rate deposits is now based on ARR plus a spread, and the overall ceiling has been increased by 50 basis points for all tenors. FEDAI will publish the ARR temporarily to ensure a smooth transition.
What it means for you
Banks can now offer higher interest rates on FCNR(B) deposits, making them more attractive to NRI depositors. The shift to ARR removes reliance on the soon-to-be-discontinued LIBOR, reducing transition risks. However, banks must update their systems and product documentation to reference ARR instead of LIBOR.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Update FCNR(B) deposit product terms and system configurations to reference Overnight Alternative Reference Rates instead of LIBOR.
Train treasury and operations teams on the new ARR-based ceiling calculation and the 50 bps spread increase.
Monitor FEDAI publications for ARR rates until a permanent benchmark is established.
Review and amend customer-facing documents and rate sheets to reflect the revised interest rate ceilings.
Ensure compliance with the amended Master Direction sections for both scheduled commercial banks and co-operative banks.
Who it affects
Scheduled Commercial Banks (including RRBs), Small Finance Banks, Local Area Banks, Payment Banks, Primary (Urban) Co-operative Banks, District Central Co-operative Banks, State Co-operative Banks, NRI depositors holding FCNR(B) accounts
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-18 07:14 IST
Status change: withdrawn03 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the new interest rate ceiling for FCNR(B) deposits of 1 to 3 years?
For deposits of 1 year to less than 3 years, the ceiling is Overnight Alternative Reference Rate (ARR) for the respective currency or Swap rate plus 250 basis points, up from the earlier LIBOR/Swap plus 200 bps.
Why did RBI replace LIBOR with ARR for FCNR(B) deposits?
LIBOR is being phased out globally as a benchmark rate. RBI adopted Overnight Alternative Reference Rates to ensure a smooth transition and maintain a reliable benchmark for pricing these deposits.
Will FEDAI continue to publish the reference rates?
Yes, FEDAI will publish the Overnight Alternative Reference Rate for each currency until a widely accepted benchmark is established, to address information asymmetry during the transition.
📜 Read the original circular — full text as issued by RBI
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-2022/123 · issued 11 Nov 2021. The plain-English explanation above is BankPulse’s own independent summary.
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12191&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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