RBI extends deregulation of NRE, FCNR deposit rates till 28 February

The Reserve Bank of India (RBI) today extended the deregulated interest rate scheme for FCNR and NRE deposits by another one month, till 28 February, and cut 1 per cent interest rate on 3-5 years FCNR (B) deposit from 1 March.

RBI has allowed banks to offer interest rates on incremental NRE deposits with maturity of 3 years and above without any ceiling in order to pass on the benefit of exemption provided on such deposits from CRR/ SLR requirements up to 28 February, from 31 January 2014.

With effect from 1 March 2014, the interest rate ceiling will revert to the position prior to 14 August 2013, ie, interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits, RBI said.

All other instructions in this regard, as amended from time to time, will remain unchanged, it added.

In order to give banks some time, RBI said, it has been decided that the interest rate ceiling on FCNR (B) deposits prescribed vide circular dated 14 August 2013 will continue till 28 February 2014 and will revert to the ceiling prior to 14 August 2013, with effect from 1 March 2014.

The new rates will be LIBOR/Swap plus 300 basis points from existing LIBOR/Swap plus 400 basis points for maturities of three to five years, RBI said.

The central bank had raised the ceiling to LIBOR/Swap plus 400 basis points to help attract more inflows from abroad.