RBI ups interest rate ceiling on longer-term NRI deposits
14 Aug 2013
The Reserve Bank of India (RBI) today raised the ceiling on interest on longer-term deposits of non-residents by 100 basis points in a bid to attract foreign currency flows.
For foreign currency non-resident bank (FCNRB) accounts with maturities of 3-5 years, RBI raised the interest rate ceiling to Libor/Swap plus 400 basis points from Libor/ Swap plus 300 basis points.
RBI also removed the ceiling on interest rates on non-resident external rupee deposits with maturities of three years and above.
Since interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits, RBI decided to give banks the freedom to offer interest rates on all incremental NRE deposits without any ceiling.
The extant ceiling on NRO accounts will continue, RBI said.
RBI also exempted those deposits from cash reserve ratio and statutory liquidity ratio requirements.
Further, advances extended in India against the incremental FCNR (B) / NRE deposits qualifying for exemption from CRR/SLR requirements as above will also be excluded from Adjusted Net Bank Credit for computation of priority sector lending targets, RBI said.
