RBI raises interest rate ceiling on NRE, FCNRB deposits

The Reserve Bank of India (RBI) today announced an increase in the interest rate ceiling on the non-resident external (NRE) rupee deposits and foreign currency non-resident banks (FCNRB) deposits in a bid to attract foreign currency deposits.

Interest rates on all new non-resident (external) rupee (NRE) term deposits for one to three years maturity should not exceed the LIBOR/SWAP rates plus 275 basis points, as on the last working day of the previous month, for US dollar of corresponding maturities.

The interest rates will also be applicable to deposits with the maturity period exceeding three years and to deposits renewed after their present maturity period, RBI said.

The interest rate on NRE deposits was LIBOR/SWAP rates plus 175 basis points since 15 November 2008.

Interest rate on FCNR(B) deposits of all maturities contracted from the close of business on 23 November 2011, will be within the ceiling rate of LIBOR/SWAP rates plus 125 basis points for the respective currency/corresponding maturities.

Interest rate on floating rate deposits will be within the ceiling of SWAP rates for the respective currency/maturity plus 125 basis points and the interest reset period will be six months.

The interest rate on these deposits was LIBOR/SWAP rates plus 100 basis points since 15 November 2008.

"The interest rates as determined above for three year deposits will also be applicable in case the maturity period exceeds three years. The changes in interest rates will also apply to NRE deposits renewed after their present maturity period," the Reserve Bank of India said in a release.