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RBI Hikes NRE Deposit Rate Cap for UCBs to LIBOR+100 bps

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2005-06/370 · issued 20 Apr 2006 · ~2 min read

Quick answerRBI raised the maximum interest rate on fresh NRE term deposits (1-3 years) for Urban Co-operative Banks to LIBOR/SWAP plus 100 basis points, effective from close of business on April 18, 2006. This replaces the earlier cap of plus 75 bps effective since November 17, 2005.

What changed

The ceiling on NRE term deposit rates for UCBs was increased from LIBOR/SWAP plus 75 basis points to plus 100 basis points. This applies to fresh deposits of 1-3 years maturity. For deposits with maturity beyond three years, the rate determined for three-year deposits applies. The new rates are effective from close of business on April 18, 2006, and also cover renewals of existing NRE deposits.

What it means for you

UCBs can now offer higher rates on NRE deposits, making them more competitive against other banks and instruments. This could help attract more NRI funds, but also raises the cost of funds for these banks. The move signals RBI's intent to align NRE deposit rates with global market conditions while giving UCBs more flexibility.

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 your NRE term deposit rate slabs to reflect the new ceiling of LIBOR/SWAP plus 100 bps for 1-3 year maturities.
Ensure the revised rates are applied to all fresh NRE deposits booked from April 18, 2006, and to renewals of existing deposits.
Communicate the rate change to your treasury and branch operations teams for consistent implementation.
Monitor LIBOR/SWAP rates monthly to set compliant deposit rates within the new ceiling.

Who it affects

Primary (Urban) Co-operative Banks, NRE depositors (Non-Resident Indians), Treasury and deposit operations teams at UCBs

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-19 18:40 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn 05 Aug 2026, 04:00 IST

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

Does the new rate cap apply to NRE savings accounts as well?

No, this circular specifically addresses NRE term deposits. Savings account interest rates on NRE deposits are governed by separate instructions.

What is the reference rate for the LIBOR/SWAP cap?

The cap uses the LIBOR or SWAP rates for US dollar of corresponding maturities, as on the last working day of the previous month.

Are existing NRE deposits affected by this change?

Only NRE deposits renewed after their present maturity period will be subject to the new rate ceiling. Existing deposits continue under their contracted rates.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)

Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)

RBI’s words: “Official withdrawal register entry #2671: UBD.(PCB).BPD.No.Cir.48/13.01.000/2005-06 — "Interest Rate on Non-Resident (External) Rupee (NRE) Deposits - UCBs" dated April 20, 2006”

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

RBI/2005-06/370
 UBD.(PCB). BPD.No. Cir 48 /13.01.000/2005-06 
 April 20, 2006 
 The Chief Executive Officers of
 All Primary (urban) Co-operative Banks 
 Dear Sir/ Madam, 
 Interest Rate on Non-Resident (External) Rupee (NRE) Deposits - UCBs 

 Please refer to our circular UBD.PCB.Cir 17/13.01.000/2005-06 dated November 22, 2005 read with UBD (PCB) BPD Cir No. 42/13.01.000/2005-06 dated April 5, 2006 on the captioned subject. 

 2. On a review, it has been decided that until further notice and with effect from close of business in India on April 18, 2006, the interest rates on Non-Resident (External) Rupee (NRE) Term Deposits will be as under: 

 i. 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 maturities plus 100 basis points (as against 75 basis points effective since November 17, 2005) . 

 ii. The interest rates as determined at para 2 (i) for three year deposits should also be applicable in case the maturity period exceeds three years. 

 iii. The changes in interest rates will also apply to NRE deposits renewed after their present maturity period. 

 3. A directive amending the earlier directive dated November 22, 2005 on the interest rate is annexed. All Other terms and conditions applicable to the NRI deposits remain unchanged. 

 4. Please acknowledge the receipt to the concerned Regional Office of Reserve Bank of India. 

 Yours faithfully 

 (N.S.Vishwanathan) 
 Chief General Manager-in-charge 
 UBD.No.Dir. 2 /13.01.000/2005-06 
 April 20, 2006 

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

 In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (AACS) and in partial modification of directive UBD.No. Dir 1/13.01.000/2005-06 dated November 22, 2005 on Interest Rates on Non Resident (External) Rupee (NRE) deposits, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby effects the under noted changes in the interest rates on Non Resident (External) Rupee (NRE) 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 April 18, 2006 shall not exceed the LIBOR/ SWAP rates of the last working day of the previous month for US dollar of corresponding maturities plus 100 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". 
 (V.S Das) 
 Executive Director

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/370 · issued 20 Apr 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=2842&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.