New Delhi, June 16 -- The Reserve Bank of India (RBI)'s decision to absorb the foreign exchange hedging cost on fresh foreign currency non-resident (bank), or FCNR (B) deposits, has created an opportunity for overseas Indians to earn attractive returns from a fixed-income product. The move announced on 5 June as part of measures to attract dollar inflows and support the rupee allows banks to swap dollars with the RBI at a concessional rate, effectively eliminating a key cost that had previously limited the interest rates they could offer.

Banks moved quickly to pass on the benefit. Within days, several lenders hiked rates on FCNR (B) deposits. HDFC Bank, ICICI Bank, Axis Bank and Bank of Baroda are now offering a peak rate of 6% on depos...