Whalesbook
Canara Bank has introduced a new FCNR(B) deposit scheme for NRIs, offering interest rates up to 6.5% on US dollar deposits for 3 to 5-year tenures. This initiative follows the Reserve Bank of India's recent forex swap facility aimed at boosting foreign currency inflows. Investors may monitor how this scheme impacts the bank’s liability profile and profitability, especially alongside recent regulatory observations regarding compliance.
What Happened
Canara Bank has launched a special Foreign Currency Non-Resident (Bank) or FCNR(B) deposit scheme for non-resident Indians (NRIs). The bank is offering interest rates of up to 6.5% per annum on US dollar deposits with tenures ranging from three to five years. This scheme, which became effective on June 11, 2026, also covers other major currencies including the British pound, euro, Canadian dollar, and Australian dollar. The deposits require a mandatory one-year lock-in period.
Why This Matters For Investors
This launch follows a strategic move by the Reserve Bank of India (RBI) in June 2026, which opened a special swap window to assist banks. Under this arrangement, the central bank subsidizes the hedging costs that banks usually incur when raising foreign currency deposits. This relief allows banks like Canara Bank to offer higher interest rates on NRI deposits compared to standard market rates, without taking on excessive currency risk. For the bank, this is a way to strengthen its foreign currency liability franchise and shore up liquidity.
Financial Context
Canara Bank recently concluded its 2025-26 fiscal year with an annual net profit of ₹19,187 crore, reflecting a 12.7% increase compared to the previous year. While the bank saw resilient annual performance, its fourth-quarter net profit for FY26 dipped by 10% year-on-year to ₹4,506 crore. A key positive for shareholders has been the steady improvement in asset quality, with the Gross Non-Performing Assets (GNPA) ratio falling to 1.84% as of March 2026, down from 2.94% in March 2025.
Regulatory Observations
Investors should be aware of recent regulatory actions involving the bank. In June 2026, the Reserve Bank of India imposed a penalty of ₹41.8 lakh on Canara Bank for non-compliance with certain Know Your Customer (KYC) norms and for errors in classifying inactive accounts. Additionally, the bank received a smaller penalty of approximately ₹2.5 lakh for delayed reporting by its currency chest. While these penalties do not impact the core business operations or financial stability of the lender, they highlight areas where the bank is currently under regulatory scrutiny regarding internal processes.
What Investors Should Track
Going forward, the primary monitorable for investors will be the response to this FCNR(B) scheme. The success of the bank in mobilizing these deposits will determine how effectively it can manage its cost of funds and foreign currency liability profile during the window available until September 30, 2026. Shareholders may also watch for continued management commentary on net interest margins, given that previous guidance suggested a conservative outlook on margins. Finally, further updates on compliance and internal control improvements will be relevant to ensure the bank maintains its regulatory standing without recurring penalties.