The moderation comes after two years of strong growth. Premium income was up 72.7 per cent in FY24 and 42.8 per cent in FY25, marking a sharp recovery from the 61.1 per cent contraction recorded in FY22. Over the past decade, flows have remained episodic, fluctuating between double-digit growth and sharp contraction.
“The growth of NRI deposits has always been very episodic and inconsistent,” says Prof. Anil Sood of the Institute for Advanced Studies in Complex Choices (IASCC). He noted that inflows had stabilized at around $6 billion per year between 2017-18 and 2022-23, before rising to $9 billion in 2023-24 and $13 billion in 2024-25. The current reduction could likely return cash flows to normal levels of less than $10 billion.
Vivek Iyer, Partner and Financial Services Risk Advisory Leader, Grant Thornton Bharat, attributed the latest slowdown to currency expectations. “NRI deposits slowed on expectations of a weaker rupee amid global geopolitical uncertainties. It was more of a timing game to ensure that more rupees were received for the same amount of dollars,” he said, adding that the change appears to be tactical rather than structural.
FCNR (B) deposits are declining
Category-by-category data shows that the decline in overall NRI deposit flows was driven by FCNR(B) accounts, where inflows fell sharply by 68.4 percent year-on-year to $2.04 billion in FY26, compared to $6.46 billion in the same period last year.
FCNR(B) deposits are foreign currency denominated time deposits that protect investors against exchange rate risks as both principal and interest are held in foreign currencies.
In contrast, NRE deposits grew 41.7 percent to $5.06 billion in FY26, compared to $3.57 billion a year earlier. These accounts are rupee deposits, with both principal and interest fully repatriable and tax-free in India.
Meanwhile, NRO accounts, rupee-denominated accounts used to manage income earned in India such as rent or dividends and provide limited repatriation benefits, rose 24.3 percent to $4.09 billion in FY26, compared to $3.29 billion in the corresponding period last year.
Nearly 80 percent of NRI deposits are held in repatriable accounts – FCNR(B) and NRE – making them sensitive to interest rate differentials and currency expectations. According to Sood, macroeconomic stability, combined with relatively higher interest rates, sometimes driven by RBI incentives, has historically supported inflows.
Experts pointed out that FCNR(B) deposits have historically been more volatile as investors in these foreign currency accounts are more sensitive to returns and wary of exchange rate risks. In contrast, NRE deposits, which are largely held by workers with long-standing ties to India, tend to be more stable and less sensitive to short-term currency fluctuations.
They also added that in a phase of rupee depreciation, NRE accounts, which are denominated in rupees, become more attractive as they translate into higher returns on the rupee for the same dollar inflows.
Looking ahead, analysts expect flows to stabilize rather than increase. “We can see stable flows only if the INR is stable and the RBI does not cut the policy rate,” Sood said, warning that rate cuts or expectations of depreciation could deter deposits.
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Published on February 26, 2026
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