What changed
The ceiling on NRE deposit interest rates for RRBs was raised from the existing LIBOR/SWAP rates to LIBOR/SWAP rates plus 50 basis points. This change applies to deposits with maturities of one to three years, and also for deposits exceeding three years. The new rates are effective for deposits contracted or renewed from November 1, 2004.
What it means for you
RRBs can now offer slightly higher interest 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. Banks must ensure they do not exceed the new ceiling when setting rates for new or renewed NRE deposits.
What you must do
- Update NRE deposit interest rate ceilings to LIBOR/SWAP rates for US dollar of corresponding maturity plus 50 basis points.
- Apply the new ceiling to all NRE deposits contracted or renewed from November 1, 2004.
- Ensure compliance with the amended directive and communicate changes to relevant branches.
Who it affects
Regional Rural Banks (RRBs), Sponsor Banks of RRBs, Non-resident depositors with NRE accounts
What is the new ceiling for NRE deposit rates?
The ceiling is 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 maturity over three years?
Yes, the rate determined for three-year deposits also applies to deposits with maturity exceeding three years.
When does this change take effect?
It is effective for deposits contracted or renewed from November 1, 2004.