What changed
The ceiling on interest rates for NRE deposits with maturities of one to three years was raised from the existing LIBOR/SWAP rates to LIBOR/SWAP rates plus 50 basis points. The same ceiling applies to deposits with maturity exceeding three years and to renewals after the current maturity period.
What it means for you
State and District Central Co-operative Banks can now offer slightly higher rates on NRE deposits, making them more attractive to non-resident depositors. This aligns NRE deposit rates more closely with international rates, potentially increasing inflows but also raising banks' cost of funds on these deposits.
What you must do
- Update NRE deposit interest rate ceilings for 1-3 year maturities to LIBOR/SWAP plus 50 bps effective November 1, 2004.
- Apply the new ceiling to all new NRE deposits and renewals after the current maturity period.
- Ensure compliance with the amending directive and acknowledge receipt to your regional RBI office.
Who it affects
State and District Central Co-operative Banks (DCCBs), Non-resident depositors with NRE accounts
What is the new ceiling on NRE deposit rates?
For deposits of one to three years maturity, the rate cannot exceed the LIBOR/SWAP rate for US dollar of corresponding maturity as on the last working day of the previous month, plus 50 basis points.
Does this apply to deposits with maturities over three years?
Yes, the same ceiling (LIBOR/SWAP plus 50 bps) applies to deposits with maturity exceeding three years.
When does this change take effect?
The new rates apply to deposits contracted or renewed with effect from November 1, 2004.