Many Indian banks have increased the rate of interest offered on Foreign Currency Non-Resident (FCNR) and non-Resident External (NRE) (Rupee) accounts.
| In keeping with the measures announced by the Reserve Bank of India (RBI), the banks in India have started hiking the interest rates that they offer on FCNR and NRE (Rupee) deposits. |
RBI had recently raised the interest rate ceiling on FCNR and NRE deposits by 0.75%.
State Bank of India (SBI)
SBI has increased the rate effective Monday, 17th Nov 2008.
For NRE (Rupee) deposits having a duration between 1 year and 2 years, the rate has been increased from 4.17% to 4.92%.
For a tenure ranging from 2 years to 3 years and 3 years to 5 years, the rate has been hiked from 3.66% to 4.41% and from 4.14% to 4.89% respectively.
For FCNR deposits (US dollar denominated) having a duration between 1 year and 2 years, the rate of interest has been hiked from 3.42% to 4.17%. The rate for deposits of 2 to 3 years has been increased from 2.91% to 3.66%.
The new rate for deposits having a duration of 3 to 4 years, 4 to 5 years and above 5 years is 4.14%, 4.49% and 4.76% respectively.
ICICI Bank
ICICI Bank has increased the interest rates on FCNR and NRE deposits with effect from 18th November 2008.
NRE Deposits: The rate for 1 year deposit has been increased to 4.92%.
FCNR (US Dollar USD): The rate for 1 year deposit has been increased to 4.17%.
FCNR (British Pound GBP): The rate for 1 year deposit has been increased to 7.01%.
Punjab National Bank (PNB)
PNB has increased the interest rate for FCNR and NRE deposits by 0.75%.
State Bank of Patiala (SBP)
SBP has increased the interest rate for FCNR and NRE deposits by 0.75%.
Other banks
Most other banks in India are expected to follow suit, and increase the interest rates on FCNR and NRE deposits by 0.75%.
The rationale
The interest rates in India have started declining (Please see “Banks in India start cutting lending and deposit rates”)
Then, why are the rates on NRI / PIO deposits being increased?
This hike in interest rates is primarily to attract more foreign exchange into the country, at a time when many foreign investors (primarily FIIs) are taking their dollars out of India.
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