Press Information Bureau

Government of India

Ministry of Finance

11-May-2012 17:44 IST

Interest Rate on NRIs Deposits

To provide greater flexibility to banks in mobilizing non-resident deposits and in view of prevailing market conditions, the Reserve Bank of India (RBI) deregulated interest rates on Non-Resident (External) Rupee (NRE) Deposits and Savings deposits under Ordinary Non-Resident (NRO) Accounts with effect from 16 December 2011. After the deregulation almost all banks increased their NRE term deposit rates in the range of 349-628 basis points across various maturities to align with domestic term deposits. In the post deregulation period up to 20.04.2012, Non-Resident Indians (NRI) deposit increased by 12.1 per cent (Rs.33,874 crore); and NRO deposits grew marginally by 1.9 per cent (Rs.1,199 crore). However, Foreign Currency Non Resident [FCNR(B)] deposit contracted by 3.8 per cent during the period. Further, with effect from 4 May 2012, RBI raised the interest rate ceiling on FCNR (B) deposit of banks from 125 basis points above the corresponding LIBOR/Swap rates to 200 basis points for maturity period of one year to less than three years, and to 300 basis points for maturity period of 3 to 5 years.

This information was given by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question in Lok Sabha today.

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DSM/SS/Hb

Interest rate deregulation for NRI deposits broadened banks' pricing flexibility and raised FCNR(B) rate ceilings for select maturities. Deregulation of interest rates on non-resident rupee accounts gave banks discretion to raise NRE term deposit rates, driving increased NRE balances and modest NRO growth. Additionally, the ceiling on FCNR(B) deposit interest was raised, increasing permitted spreads above corresponding LIBOR/swap rates for specified one-to-three and three-to-five year maturities, thereby changing the regulatory cap on foreign-currency non-resident term deposit pricing.