Mumbai: To improve inflow of foreign currency, the Reserve Bank of India (RBI) on Friday deregulated the interest rates that banks would pay on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) accounts.
RBI said this would provide greater flexibility to banks in mobilising non-resident deposits in the prevailing market conditions. “Banks are free to determine their interest rates on both savings deposits and term deposits of a maturity of one year and above under NRE deposit accounts and savings deposits under NRO accounts with immediate effect,” it said.
The revised deposit rates will apply only to new deposits and on renewal of those that have matured. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than rates offered on comparable domestic rupee deposits. Also, at any point of time, an individual bank should offer uniform rates at all its branches. Currently, banks offer 3.51 per cent on NRE deposits for two-three years and 3.64 per cent for deposits above three years.
RBI said banks may take prior approval of their respective boards or asset liability committees while fixing the interest rates on such deposits. Also, banks have been asked to closely monitor their external liability arising on account of such deregulation and ensure asset-liability compatibility from a systemic risk point of view.
This step comes three weeks after RBI had raised the cap on interest rates on NRE and Foreign Currency Non Residential Account (B) (FCNR-B) deposits by 100 basis points and 25 bps, respectively. “The deregulation provides a good opportunity for NRIs to get attractive rates. We will soon take a decision on revising the rates to tap this route,” said Alok Misra, chairman and managing director, Bank of India.
Indian banks have a network of branches abroad -- in West Asia, the Asia-Pacific, Britain and North America. RBI data shows the deposits in NRE accounts were $25 billion and in NRO accounts, $11 bn, at the end of October.
No comments:
Post a Comment