RBI removes 25 bps deduction from LIBOR/SWAP ceiling for FCNR(B) deposits
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2005-06/344 · issued 31 Mar 2006 · ~2 min read
Quick answerRBI has removed the 25 basis points deduction from LIBOR/SWAP rates for FCNR(B) deposits contracted effective close of business in India on March 28, 2006. Banks can now pay interest up to the full LIBOR/SWAP rate for the respective currency and maturity, instead of the earlier ceiling of LIBOR/SWAP minus 25 bps.
What changed
Earlier, FCNR(B) deposit interest was capped at LIBOR/SWAP rates minus 25 basis points. Effective close of business on March 28, 2006, the 25 bps deduction has been removed, allowing interest up to the full LIBOR/SWAP rate. For floating rate deposits, the ceiling is now the full SWAP rate, with a six-month reset period unchanged.
What it means for you
Banks can now offer higher interest rates on FCNR(B) deposits, making them more attractive to non-resident depositors. This could increase FCNR(B) inflows but may also raise banks' cost of funds. Lenders need to recalibrate their deposit pricing strategies to remain competitive while managing margins.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Update FCNR(B) deposit interest rate ceilings to LIBOR/SWAP rates without the 25 bps deduction for contracts from March 28, 2006.
Review and revise internal pricing models and system parameters for FCNR(B) deposits accordingly.
Communicate the revised rate structure to branches and treasury teams to ensure compliance.
Monitor competitive landscape and adjust offered rates to attract FCNR(B) deposits without eroding margins.
Who it affects
Banks accepting FCNR(B) deposits, Co-operative banks (specifically those under Section 35A of B.R. Act) handling FCNR(B) accounts, Treasury and ALM teams, Non-resident depositors
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-19 18:49 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn05 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the effective date for the new FCNR(B) interest rate ceiling?
The revised ceiling applies to deposits contracted effective close of business in India on March 28, 2006.
Does this change affect floating rate FCNR(B) deposits?
Yes, for floating rate deposits, the ceiling is now the full SWAP rate for the respective currency/maturity, instead of SWAP minus 25 bps. The interest reset period remains six months.
Which currencies and maturities are covered under this circular?
The circular applies to FCNR(B) deposits of all maturities and all currencies for which LIBOR/SWAP rates are available.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed byRBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #2687: RPCD.CO.RF.BC.72/07.38.01/2005-06 — "Interest Rate on FCNR(B) Deposits" dated March 31, 2006”
📜 Read the original circular — full text as issued by RBI
RBI/2005-06/344
RPCD.CO.RF.BC. 72/ 07.38.01 / 2005-06
March 31, 2006
The Managing Director
Maharashtra State Co-operative Bank Ltd.
9, Nagindas Master Road Extension, Fort
Mumbai-1
Dear Sir,
Interest Rate on FCNR(B) Deposits
Please refer to our circular RPCD.CO.RF.BC 54/07.38.01/2004-05 dated November 1, 2004 on the above subject. In terms of the above guidelines, you were free to accept FCNR(B) deposits and pay interest within the ceiling rate of LIBOR / SWAP rates for the respective currency / corresponding maturities minus 25 basis points. On floating rate deposits, interest was to be paid within the ceiling of SWAP rates for the respective currency / maturity minus 25 basis points. For floating rate deposits, the interest reset period would be six months.
2. The matter has been reviewed and it has been decided that in respect of FCNR(B) deposits of all maturities contracted effective close of business in India on March 28, 2006, interest shall be paid within the ceiling rate of LIBOR / SWAP rates for the respective currency / corresponding maturities. On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency / maturity. For floating rate deposits, the interest reset period shall be six months.
3. An amending Directive RPCD.RF.DIR 3376 /07.38.01/2005-06 dated March 31, 2006 is enclosed.
Yours faithfully,
(G.Srinivasan)
Chief General Manager
RPCD.RF. Dir 3376/07.38.01/2005-06
March 31, 2006
Foreign Currency (Non-Resident) Accounts (Banks) Scheme
In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies), the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby directs the following:
Interest rates applicable to deposits accepted under Foreign Currency Non-Resident Accounts (Banks) Scheme
In respect of FCNR(B) deposits of all maturities contracted effective close of business in India on March 28, 2006, interest shall be paid within the ceiling rate of LIBOR / SWAP rates for the respective currency / corresponding maturities. On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency / maturity. For floating rate deposits, the interest reset period shall be six months.
(V.S.Das)
Executive Director
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/344 · issued 31 Mar 2006. The plain-English explanation above is BankPulse’s own independent summary.
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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=2802&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.
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