What changed
The ceiling on NRE term deposit rates for 1-3 year maturities was raised by 25 basis points, from LIBOR/SWAP plus 75 bps to plus 100 bps. The change took effect from close of business on April 18, 2006, and also applies to renewals of existing deposits.
What it means for you
RRBs and sponsor banks can now offer higher rates on NRE term deposits (1-3 years), aligning with the Annual Policy Statement.
What you must do
- Update NRE deposit rate slabs to ensure rates do not exceed LIBOR/SWAP plus 100 bps for 1-3 year tenors.
- Apply the new ceiling to all fresh NRE deposits booked from April 18, 2006, and to renewals of maturing deposits.
- Communicate the revised rate structure to branches and ensure compliance with the directive under Section 35A of the Banking Regulation Act, 1949.
- Acknowledge receipt of the circular to your respective RBI Regional Office.
Who it affects
Regional Rural Banks (RRBs), Sponsor Banks of RRBs
Does the new rate ceiling apply to NRE deposits with maturity beyond three years?
Yes, the rate determined for three-year deposits (LIBOR/SWAP plus 100 bps) also applies to deposits with maturity exceeding three years.
Are existing NRE deposits affected by this change?
Only NRE deposits renewed after their current maturity period will be subject to the new ceiling. Existing deposits continue under their contracted rates.
What is the reference rate for calculating the ceiling?
The ceiling is based on the LIBOR/SWAP rates for US dollar of corresponding maturities, as on the last working day of the previous month.