Best NRE Fixed Deposit (FD) Interest Rates for NRIs

best nre fixed deposits

Do you agree that NRE (Non Resident External) Fixed Deposits are amongst the best fixed investment options for NRIs?

And if you do, are you interested in the best interest rates on offer for these deposits right now?

If yes, this post should help.

I will compare the interest rates being offered by all top banks as well as list down the banks offering the highest rates right now...

More...

But before I get into specifics, let's quickly revisit two big reasons behind the ever-soaring popularity of non resident external deposits:

  • These deposits offer much higher interest when compared to most countries that NRIs reside in.
  • The returns earned are completely tax free in India

With that, let's look at the current interest rate offers for these investments (updated for 2017).

NRE Fixed Deposit Rates

Let's first look at returns being offered on NRE deposits by top 10 banks in India.

NRE FD Rates Comparison for Top Banks in India

Banks1 Years2 Years3 Years4 Years5 Years5+ Years
State Bank of India6.25%6.25%6.00%6.00%6.00%6.00%
HDFC Bank6.75%6.25%6.00%6.00%6.00%6.00%
ICICI Bank6.60%6.75%6.50%6.50%6.50%6.50%
Axis Bank6.75%6.85%6.25%6.25%6.25%6.25%
Punjab National Bank6.60%6.50%6.50%6.25%6.25%6.25%
Canara Bank6.50%6.30%6.20%6.20%6.20%6.00%
Bank of Baroda6.45%6.55%6.50%6.50%6.50%6.25%
Union Bank of India6.75%6.50%6.50%6.50%6.50%6.50%
IDBI Bank6.75%6.50%6.25%6.25%6.25%6.00%
Bank of India6.60%6.50%6.50%6.30%6.30%6.25%

As you can see, amongst top 10 Indian banks (by size), four banks tie for the first place and offer 6.75% per annum.

Generally, for any FD, there are two key factors that will largely determine the return you make:

  1. The bank that you are making your deposit with
  2. The tenure of your deposit

Banks have the flexibility to decide their own rates and hence the interest they offer will change from time to time. Rates increase when they are chasing growth and they decrease if they are chasing profitability.

But, the rate you get quoted at the time of investment is assured for the entire duration.

However, an important point to note is biggest banks don't always offer the best returns. In fact, some of the best offers come from new and upcoming banks that want your business much more than the market leaders.

Also, like any other FD, the tenure of your fixed deposit is very important and will significantly impact the interest you get.

More often than not, shorter duration plans will earn lesser interest when compared to longer duration ones (though there are exceptions).

For purposes of this post, let's look at best returns on offer according to different FD durations on offer.

Best Interest Rates for 1 year FDs

BanksInterest Rate
Repco Bank7.25%
Bandhan Bank7.15%
City Union Bank7.10%
RBL Bank7.10%
IDFC Bank7.00%
Lakshmi Vilas Bank7.00%
Tamilnad Mercantile Bank7.00%
Karnataka Bank6.90%
DCB Bank6.85%
Indus Ind Bank6.85%

As you can see, Repco Bank offers the highest gains on 1 year investments at 7.25%. Bandhan bank and City Union Bank follow closely.

Best Interest Rates for 2 year FDs

BanksInterest Rate
IDFC Bank7.25%
Lakshmi Vilas Bank7.25%
RBL Bank7.20%
Bandhan Bank7.15%
DCB Bank7.00%
Karur Vysya Bank7.00%
Repco Bank7.00%
Tamilnad Mercantile Bank7.00%
Karnataka Bank6.90%
Axis Bank6.85%

IDFC Bank & Lakshmi Vilas Bank jointly win the race for two year fixed deposits. RBL Bank is a close second. 

Best Interest Rates for 3 year FDs

BanksInterest Rate
DCB Bank7.25%
IDFC Bank7.20%
RBL Bank7.20%
Karur Vysya Bank7.00%
Lakshmi Vilas Bank7.00%
Repco Bank7.00%
Tamilnad Mercantile Bank7.00%
City Union Bank6.85%
Bandhan Bank6.80%
Catholic Syrian Bank6.75%

DCB is the bank with the highest interest rate at 7.25% for 3 year deposits, while IDFC Bank and RBL Bank follow closely.

Highest Interest Rates for 4 year FDs

BanksInterest Rate
IDFC Bank7.20%
DCB Bank7.10%
RBL Bank7.10%
Deutsche Bank7.00%
Karur Vysya Bank7.00%
Lakshmi Vilas Bank7.00%
Repco Bank7.00%
Tamilnad Mercantile Bank6.90%
City Union Bank6.85%
Bandhan Bank6.80%

IDFC Bank is in a leadership position for 4 year fixed deposits as well at 7.20%. Otherwise the list is more or less similar for 3 year and 4 year FDs.

Highest Interest Rates for 5 year FDs

BanksInterest Rate
Deutsche Bank7.75%
IDFC Bank7.20%
DCB Bank7.10%
RBL Bank7.10%
Karur Vysya Bank7.00%
Lakshmi Vilas Bank7.00%
Repco Bank7.00%
Tamilnad Mercantile Bank6.90%
City Union Bank6.85%
Bandhan Bank6.80%

With 5 year FDs, Deutsche Bank offers a really attractive 7.75% rate.

Highest Interest Rates for FDs for 5+ years

BanksInterest Rate
IDFC Bank7.20%
RBL Bank7.10%
DCB Bank7.00%
Karur Vysya Bank7.00%
Lakshmi Vilas Bank7.00%
Tamilnad Mercantile Bank6.90%
Yes Bank6.75%
City Union Bank6.70%
Allahabad Bank6.50%
Catholic Syrian Bank6.50%

For a duration from 5 to 10 years, IDFC Bank offers the highest returns at 7.20%. RBL Bank is second.

No premature withdrawal penalties

As you can see, a ton of banks make very attractive offers when it comes to NRI investments. However, when it comes to fixed deposits, interest percentage is not the only measure that you should go by.

Most fixed deposits have a pre-mature withdrawal penalty i.e. if you withdraw prior to the original duration, you will incure a penalty on your investment. Non Resident External FDs are no different and most banks will charge anywhere from 0.5% to 1% as a penalty if you break your investments.

However, there are some banks who have decided to waive it off.

Let's have a look...

Banks with no withdrawal penalties

Banks1 Years2 Years3 Years4 Years5 Years5+ Years
Axis Bank6.75%6.85%6.25%6.25%6.25%6.25%
Bank of India6.60%6.50%6.50%6.30%6.30%6.25%
Catholic Syrian Bank6.50%6.50%6.75%6.50%6.50%6.50%
Central Bank of India6.60%6.50%6.50%6.50%6.50%6.50%
DCB Bank6.85%7.00%7.25%7.10%7.10%7.00%
Dena Bank6.50%6.50%6.25%6.25%6.30%6.30%
IDBI Bank6.75%6.50%6.25%6.25%6.25%6.00%
Indian Bank6.50%6.25%6.25%6.00%6.00%6.00%
Karnataka Bank6.90%6.90%6.50%6.50%6.50%6.50%
Lakshmi Vilas Bank7.00%7.25%7.00%7.00%7.00%7.00%
South Indian Bank6.75%6.85%6.50%6.50%6.50%6.50%
State Bank of India6.25%6.25%6.00%6.00%6.00%6.00%
Syndicate Bank6.50%6.50%6.60%6.60%6.60%6.50%
Union Bank of India6.75%6.50%6.50%6.50%6.50%6.50%
Yes Bank6.60%6.75%6.75%6.75%6.75%6.75%

Axis and SBI are some notable top banks that have no pre-mature withdrawal penalty on their NRI deposits.

Do note that even for those banks that have no pre-mature withdrawal penalty, you won't get any interest if you close your account with-in one year as the minimum duration of these FDs as per RBI regulations has to be 1 year.

Key points to remember

  • Only bonafide Non Resident Indians can take advantage of NRE deposits. If you are not an NRI, you won't be able to make use of this facility.
  • Also, only funds from overseas income can be invested. Any Indian income you may have will go to NRO account.
  • Minimum duration for NRE FDs is 1 year as per RBI directive. If you withdraw your investment in 1st year, you won't be eligible for any interest and only your principal will be returned.
  • Most banks have a pre-mature withdrawal penalty that ranges from 0.5% to 1%. However, some banks waive it off for all investments longer than 1 year.
  • The income from these FDs is completely tax free in India. But it can be taxed in your home country. If you stay in a zero-tax country (like the UAE or Singapore), NRE FDs are really attractive.
  • Most banks offer lower returns on deposits higher than 50 lakhs/1 crore INR. Since there is no limit on no of FDs you can open, it makes sense to split your investment in multiple smaller portion to get the maximum returns.
  • Unlike normal fixed deposits offered to Indian citizens, there is no additional interest on offer for Senior Citizens.
  • The interest on these deposits is typically compounded quarterly by most banks.
  • NRE FDs are fully and freely repatriable. This means that you can convert and transfer both your principal and interest back to the foreign currency of your choice at any time without any restrictions.
  • While making this investment, keep in mind the impact of forex exchange rates. INR may gain or lose its value over time and this will impact your returns.

On a final note, you should remember that banks change their offers all the time. While this post is regularly updated, before making an investment, you should always check with your bank once.

You can contact your relationship manager or can refer to the NRI investment pages on their websites. SBI's NRE Fixed Deposits page is here, for Axis bank go here, ICICI is here and you can find HDFC here.

6 thoughts on “Best NRE Fixed Deposit (FD) Interest Rates for NRIs”

  1. Very informative, thank you.
    I will like to know if there is any restriction in number of NRE savings account in different banks?
    I have nre fixed deposit in 6 different banks that compelled to open SB accounts in the respective banks.
    For IT returns I need to disclose all SB accounts and FD account details?
    Please advise

    1. You can have multiple NRE accounts though you will need to spread same across multiple banks (one per bank as far as I know). Interest earned on NRE accounts is not taxed (unlike interest on NRO accounts). You don’t need to disclose your foreign bank account details in your IT returns though it’s always a good idea to be transparent with IT department with respect to your NRE/NRO/FCNR accounts.

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