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RBI Revises NRE Deposit Interest Rate Ceiling

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Source: Reserve Bank of India · RBI/2005-06/208 · issued 17 Nov 2005 · ~2 min read

Quick answerRBI has revised NRE deposit interest rates effective November 17, 2005. NRE savings accounts will now earn domestic savings rate instead of LIBOR/SWAP. For term deposits (1-3 years), the ceiling is LIBOR/SWAP plus 75 bps (up from 50 bps). This applies to fresh and renewed deposits.

The rule, in the simplest words

NRE savings accounts now earn the same interest as regular Indian savings accounts (domestic savings rate), not the old LIBOR/SWAP rate anymore.
For NRE term deposits (1 to 3 years), banks can pay up to LIBOR/SWAP (a global interest rate) plus 75 basis points (0.75%), which is higher than the old limit of plus 50 basis points.
The new interest rate rules apply to all new NRE deposits and also to renewals of old deposits after they mature.
Banks must follow this rule starting from November 17, 2005, and use the LIBOR/SWAP rate from the last working day of the previous month.

How it plays out — a real example

A forex & trade-finance officer in Indore, Priya, is helping an NRI customer renew a 2-year NRE term deposit. She checks the LIBOR/SWAP rate for US dollars from the last working day of the previous month, adds 75 basis points, and offers that rate to the customer, explaining that the new RBI rule allows a slightly higher interest than before.

What changed

RBI replaced the earlier NRE savings deposit rate linked to LIBOR/SWAP with the domestic savings deposit rate. For NRE term deposits of 1-3 years, the interest rate ceiling was raised from LIBOR/SWAP plus 50 bps to plus 75 bps. The same ceiling applies for maturities beyond three years.

What it means for you

Banks can now offer higher rates on NRE term deposits, potentially attracting more NRE inflows. However, NRE savings accounts become less attractive as they now earn the lower domestic savings rate. Banks need to recalibrate their NRE deposit pricing strategies to remain competitive while managing costs.

What you must do

Update NRE savings account interest rate to domestic savings rate effective November 17, 2005.
Set NRE term deposit rates for 1-3 years at or below LIBOR/SWAP plus 75 bps.
Apply the new ceiling to all fresh NRE term deposits and renewals after maturity.
Ensure compliance with the amending directive DBOD No.Dir.BC.47/13.03.00/2005-06.

Who it affects

All scheduled commercial banks (excluding RRBs), NRE deposit customers, Bank treasury and deposit pricing teams

❓ Common questions

Regulatory timeline

Stated effective date effective November 17, 2005
Decoded by BankPulse 2026-06-19 19:36 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What is the new interest rate for NRE savings accounts?

Effective November 17, 2005, NRE savings accounts will earn the same rate as domestic savings deposits, replacing the earlier LIBOR/SWAP-linked rate.

What is the maximum interest rate for NRE term deposits?

For deposits of 1-3 years, the rate cannot exceed LIBOR/SWAP rates (for US dollar of corresponding maturity) plus 75 basis points. The same ceiling applies for maturities over 3 years.

Does this apply to existing NRE term deposits?

The new rates apply to fresh deposits and to renewals of existing NRE term deposits after their current maturity period.

📜 Read the original circular — full text as issued by RBI

RBI/2005-06/208

 DBOD No. Dir. 48/13.03.00/2005-06 

 November 17, 2005 

 All Scheduled Commercial Banks

 (Excluding RRBS) 

 Dear Sir, 

 Interest Rate on Non-Resident 
 (External) Rupee (NRE) Deposits 

 Please refer to items (ii) and 
 (iii)(a) of Annexure II of our Master Circular DBOD. 
 No.Dir.BC.5/13.03.00/2005-06 dated July 1, 2005 on Interest Rates on Deposits. 
 On a review, it has been decided that until further notice and with effect from 
 close of business in India on November 17, 2005, the interest rates on Non-Resident 
 (External) Rupee (NRE) Savings and Term Deposits will be as under : 

 1. Item (ii) – NRE Savings 
 Account 

 The interest rates on NRE Savings 
 deposit accounts shall be at the rate applicable to domestic savings deposits 
 (as against LIBOR/ SWAP rate for six months maturity on US dollar deposits). 

 2. Item (iii)(a) – Term Deposits 

 The interest rates on fresh repatriable 
 Non-Resident (External) Rupee (NRE) Term deposits for one to three years should 
 not exceed the LIBOR/SWAP rates, as on the last working day of the previous 
 month, for US dollar of corresponding maturity plus 75 basis points (as against 
 50 basis points effective since November 1, 2004) . The interest rates as 
 determined above for three year deposits should also be applicable in case the 
 maturity period exceeds three years. The changes in interest rates will also 
 apply to NRE deposits renewed after their present maturity period. 

 3. The other instructions 
 as contained in our Master Circular referred to above shall remain unchanged. 
 An amending directive DBOD No.Dir.BC.47/13.03.00/2005-06 dated November 17, 
 2005 is enclosed. 

 yours faithfully 

 (P. Vijaya Bhaskar) 

 Chief General Manager 

 DBOD No. Dir.BC. 47/13.03.00/2005-06 

 November 17, 2005 

 Interest Rate on Non-Resident (External) Rupee 
 (NRE) Deposits 

 In exercise of the powers conferred by Section 
 35A of the Banking Regulation Act, 1949, and in partial modification of the 
 Master Circular DBOD 
 No.Dir.BC.5/13.03.00/2005-06 dated July 1, 2005 on Interest Rates on Deposits, 
 the Reserve Bank of India being satisfied that it is necessary and expedient 
 in the public interest so to do, hereby directs that items (ii) & (iii)(a) 
 of the Annexure II relating to the interest rates on NRE deposits shall be substituted 
 by the following : 

 1. Item (ii) - NRE Savings Account 

 'The interest rates on NRE Savings deposit accounts 
 shall be at the rate applicable to domestic savings deposit accounts (as against 
 LIBOR/SWAP rate for six months maturity on US dollar deposits), effective close 
 of business in India on November 17, 2005'. 

 2. Item (iii)(a) – NRE Term Deposits 

 'The interest rates on Non-Resident (External) 
 Rupee (NRE) deposits for one to three years maturity contracted with effect 
 from close of business in India on November 17, 2005 shall not exceed the LIBOR/ 
 SWAP rates of the last working day of the previous month for US dollar of corresponding 
 maturities plus 75 basis points . The interest rate as determined above 
 shall also be applicable in case the maturity period exceeds three years. The 
 above changes in interest rates will also apply to NRE term deposits renewed 
 after their present maturity period'. 

 (Anand Sinha) 

 Executive Director

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/208 · issued 17 Nov 2005. The plain-English explanation above is BankPulse’s own independent summary.

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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All scheduled commercial banks (excluding RRBs), NRE deposit customers, Bank treasury and deposit pricing teams), your first concrete step on “RBI Revises NRE Deposit Interest Rate Ceiling” is: “Update NRE savings account interest rate to domestic savings rate effective November 17, 2005.” (RBI issued this 17 Nov 2005).

Circular: RBI/2005-06/208 -- RBI Revises NRE Deposit Interest Rate Ceiling
Issued: 17 Nov 2005
Action required: Update NRE savings account interest rate to domestic savings rate effective November 17, 2005.
Action required: Set NRE term deposit rates for 1-3 years at or below LIBOR/SWAP plus 75 bps.
Action required: Apply the new ceiling to all fresh NRE term deposits and renewals after maturity.
Action required: Ensure compliance with the amending directive DBOD No.Dir.BC.47/13.03.00/2005-06.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________

Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2619&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.