What changed
This master circular updates the previous version from July 1, 2006 by incorporating all instructions issued up to June 30, 2007. It consolidates directives on interest rates, maturity periods, and eligible currencies for FCNR(B) deposits into one document.
What it means for you
Banks must ensure FCNR(B) deposit interest rates do not exceed LIBOR/SWAP minus 75 basis points for all maturities. The minimum maturity remains 1 year and maximum 5 years, with eligible currencies including USD, GBP, EUR, JPY, CAD, and AUD. This circular is a statutory directive under Section 35A of the Banking Regulation Act, 1949, so compliance is mandatory.
What you must do
- Update internal FCNR(B) deposit policies to align with the consolidated instructions in this master circular.
- Ensure interest rates on FCNR(B) deposits are capped at LIBOR/SWAP minus 75 bps for all tenors.
- Verify that FCNR(B) deposits are accepted only in the six permitted currencies and within the 1-5 year maturity band.
- Train staff on the updated guidelines, especially regarding premature withdrawal, overdue deposits, and advances against FCNR(B) deposits.
Who it affects
All Scheduled Commercial Banks (excluding Regional Rural Banks), Treasury and foreign exchange departments, Retail banking teams handling NRI deposits
What is the interest rate ceiling for FCNR(B) deposits under this circular?
The ceiling rate for FCNR(B) deposits of all maturities is LIBOR/SWAP rate minus 75 basis points.
What are the eligible currencies for FCNR(B) deposits as per this master circular?
The eligible currencies are US Dollar, Pound Sterling, Euro, Japanese Yen, Canadian Dollar, and Australian Dollar.
What is the minimum and maximum maturity for FCNR(B) deposits?
The minimum maturity is 1 year and the maximum maturity is 5 years, effective from July 26, 2005.