City Union Bank increases FCNR(B) rates to 7.10% for 3-5 year tenors

City Union's loan book has expanded faster than its deposit base in recent quarters. That gap, disclosed in the bank's quarterly updates, needs to be closed. Higher deposit rates are one lever to pull, even if they squeeze net interest margins. The bank likely views the rate as a necessary cost to sustain loan growth and maintain liquidity.

The move joins a broader pattern. Several private and public sector banks have nudged up FCNR rates over the past year. The Reserve Bank of India has kept its policy rate unchanged through that period, while global dollar yields have stayed elevated. NRIs have shifted some money toward higher-yielding instruments abroad, forcing Indian banks to compete harder for the funds that remain.

For City Union, the premium on FCNR deposits puts near-term margin pressure but helps secure a funding source that is less sensitive to domestic liquidity cycles. Dollar deposits from NRIs carry no exchange-rate risk for the depositor and are typically stickier than rupee wholesale deposits.

The revised rate applies only to fresh deposits. Existing FCNR(B) accounts will continue at their contracted rates.