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RBI Revises NRE and FCNR(B) Deposit Interest Rate Ceilings

Current · Source: Reserve Bank of India · RBI/2008-09/170 · issued 16 Sep 2008 · ~2 min read

Quick answerRBI has revised interest rate ceilings for NRE and FCNR(B) deposits effective September 16, 2008. NRE term deposits (1-3 years) now capped at LIBOR/SWAP plus 50 bps. FCNR(B) deposits ceiling raised to LIBOR/SWAP minus 25 bps from minus 75 bps. Banks must adjust rates accordingly.

The rule, in the simplest words

For NRE deposits (money from Indians living abroad, kept in Indian rupees) that last 1 to 3 years, banks cannot pay more than LIBOR/SWAP (a global interest rate benchmark) plus 0.50%.
For FCNR(B) deposits (foreign currency deposits from Indians abroad), banks cannot pay more than LIBOR/SWAP minus 0.25% for any length of time.
For FCNR(B) deposits with a floating rate (rate that changes over time), the ceiling is SWAP rates minus 0.25%, and the rate must be updated every 6 months.
These new rate limits start from the close of business on September 16, 2008, and apply to all new deposits and renewals of old ones.

How it plays out — a real example

A forex & trade-finance officer in Indore, Priya, is updating her bank's deposit rate sheets for NRI customers. She sees that for a new 2-year NRE deposit, she can now offer up to LIBOR/SWAP plus 0.50%, which is a bit higher than before, making it easier to attract NRI funds. She also adjusts the FCNR(B) deposit rates to not exceed LIBOR/SWAP minus 0.25%, ensuring her bank stays compliant from September 16, 2008.

What changed

For NRE term deposits (1-3 years), the interest rate ceiling was revised from the previous LIBOR/SWAP rates to LIBOR/SWAP plus 50 basis points. For FCNR(B) deposits of all maturities, the ceiling was raised from LIBOR/SWAP minus 75 basis points to minus 25 basis points. Floating rate FCNR(B) deposits now have a ceiling of SWAP rates minus 25 bps with a six-month reset period.

What it means for you

Banks can now offer slightly higher rates on NRE deposits, making them more attractive to NRIs, but must stay within the new cap. The FCNR(B) ceiling increase gives banks more room to compete for foreign currency deposits, potentially boosting inflows. However, margins may compress as funding costs rise. Banks need to update their deposit pricing models and systems immediately.

What you must do

Update NRE term deposit rate sheets to cap at LIBOR/SWAP plus 50 bps for 1-3 year tenors, effective September 16, 2008.
Adjust FCNR(B) deposit rates to not exceed LIBOR/SWAP minus 25 bps for all maturities, and ensure floating rate deposits use SWAP minus 25 bps with six-month reset.
Apply revised rates to all new deposits and renewals of existing NRE/FCNR(B) deposits after their current maturity.
Communicate changes to branch operations and treasury teams to ensure compliance from close of business September 16, 2008.

Who it affects

All scheduled commercial banks (excluding RRBs) offering NRE and FCNR(B) deposit accounts, NRI depositors and their relationship managers, Bank treasury and ALM teams managing deposit pricing

❓ Common questions

Regulatory timeline

Stated effective date effective September 16, 2008
Decoded by BankPulse 2026-06-19 12:33 IST
partially_modified_by — RBI Hikes NRE and FCNR(B) Deposit Rate Ceilings

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

What is the new interest rate ceiling for NRE term deposits?

For fresh NRE term deposits with 1-3 year maturity, the rate cannot exceed LIBOR/SWAP rates plus 50 basis points for US dollar of corresponding maturities, as on the last working day of the previous month.

How does the FCNR(B) deposit ceiling change?

The ceiling for FCNR(B) deposits of all maturities is raised from LIBOR/SWAP minus 75 bps to minus 25 bps. For floating rate deposits, the ceiling is SWAP rates minus 25 bps with a six-month interest reset period.

Do these changes apply to existing deposits?

No, they apply to fresh deposits contracted from September 16, 2008, and to renewals of existing NRE/FCNR(B) deposits after their current maturity period ends.

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

Partially modified by RBI Hikes NRE and FCNR(B) Deposit Rate Ceilings

RBI’s words: “Please refer to paragraph 1 of our circular DBOD. No. Dir. BC. 44 /13.03.00/2008-09 dated September 16, 2008”

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

RBI/2008-09/170
DBOD. 
No. Dir. BC. 44/13.03.00/2008-09
 September 16, 2008
 All 
Scheduled Commercial Banks
 (Excluding RRBs)
 Dear 
Sir
 Interest Rates on Non-Resident (External) Rupee (NRE) Deposits 

 and FCNR(B) deposits
 Interest Rates on Non-Resident (External) 
Rupee (NRE) Deposits 
 Please 
refer to paragraph 2 of our circular DBOD. 
No. Dir. BC. 89 /13.03.00/2006-07 dated April 24, 2007 on Interest Rates on 
Deposits held in Non-Resident (External) (NRE) Accounts. On a review, it has been 
decided that until further notice and with effect from close of business in India 
as on September 16, 2008, the interest rates on Non-Resident (External) Rupee 
(NRE) Term Deposits will be as under: 
 The 
interest rates on fresh Non-Resident (External) Rupee (NRE) Term Deposits for 
one to three years maturity should not exceed the LIBOR / SWAP rates plus 50 basis 
points, as on the last working day of the previous month, for US dollar of corresponding 
maturities (as against LIBOR /SWAP rates effective from close of business on April 
24, 2007). The interest rates as determined above for three year deposits will 
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.
 2. Interest Rates on FCNR(B) Deposits
 Please 
refer to paragraph 3 of our circular dated April 24, 2007 on Interest Rates on 
Deposits held in FCNR (B) Accounts. On a review, it has been decided that until 
further notice and with effect from the close of business in India as on September 
16, 2008, the interest rates on FCNR(B) Deposits will be as under:
 In 
respect of FCNR (B) deposits of all maturities contracted effective from the close 
of business in India as on September 16, 2008, interest shall be paid within the 
ceiling rate of LIBOR / SWAP rates minus 25 basis points for the respective currency 
/ corresponding maturities (as against LIBOR/ SWAP rates minus 75 basis points 
effective from close of business on April 24, 2007). On floating rate deposits, 
interest shall 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 shall be six months.
 3.  The other instructions, 
as contained in our Master Circulars DBOD. 
Dir. BC.15/13.03.00/2008-09 and BC.16/13.03.00/2008-09 
 dated July 1, 2008, as amended from time to time, shall remain unchanged. 
An amending directive DBOD.No.Dir.BC.43A/13.03.00/ 2008-09 dated 
September 16, 2008 is enclosed. 
 Yours faithfully
 (Vinay 
Baijal)
 Chief General Manager
 DBOD. 
No. Dir. BC. 43A /13.03.00/2008-09 
 September 16, 2008
   Interest 
Rates on Non-Resident (External) Rupee (NRE) Deposits and FCNR(B) deposits 
 In 
exercise of the powers conferred by Section 35A of the Banking Regulation Act, 
1949, and in modification of the directive DBOD.No.Dir.BC.88 
/13.03.00/2006-07 dated April 24, 2007 on Interest Rates on Deposits held 
in Non-Resident (External) (NRE) Accounts and FCNR(B) Accounts, the Reserve Bank 
of India being satisfied that it is necessary and expedient in the public interest 
so to do, hereby directs that  Interest Rates on Non-Resident (External) 
Rupee (NRE) Deposits and FCNR(B) deposits shall 
be as under: 
 Interest 
Rates on Deposits held in Non-Resident (External) Rupee 
(NRE) Deposits 
 ' With 
effect from the close of business as on September 16, 2008, the interest rates 
on fresh Non-Resident (External) Rupee (NRE) Term Deposits for one to three years 
maturity should not exceed the LIBOR / SWAP rates plus 50 basis points, as on 
the last working day of the previous month, for US dollar of corresponding maturities 
(as against LIBOR /SWAP rates effective from close of business on April 24, 2007). 
The interest rates as determined above for three year deposits will 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.'
 Interest 
Rates on Deposits held in FCNR(B) Accounts
 ' In respect 
of FCNR (B) deposits of all maturities contracted effective from the close of 
business in India as on September 16, 2008, interest shall be paid within the 
ceiling rate of LIBOR / SWAP rates minus 25 basis points for the respective currency 
/ corresponding maturities (as against LIBOR/ SWAP rates minus 75 basis points 
effective from close of business on April 24, 2007). On floating rate deposits, 
interest shall 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 shall be six months.'

(Anand Sinha)
 Executive Director

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/170 · issued 16 Sep 2008. The plain-English explanation above is BankPulse’s own independent summary.

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Who does what — compliance checklist

🏦 Branch Manager

Communicate changes to branch operations and treasury teams to ensure compliance from close of business September 16, 2008.

📜 Compliance

Update NRE term deposit rate sheets to cap at LIBOR/SWAP plus 50 bps for 1-3 year tenors, effective September 16, 2008.
Adjust FCNR(B) deposit rates to not exceed LIBOR/SWAP minus 25 bps for all maturities, and ensure floating rate deposits use SWAP minus 25 bps with six-month reset.
Apply revised rates to all new deposits and renewals of existing NRE/FCNR(B) deposits after their current maturity.

Grouped from the action items above — a single circular may involve more than one team.

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) offering NRE and FCNR(B) deposit accounts, NRI depositors and their relationship managers, Bank treasury and ALM teams managing deposit pricing), your first concrete step on “RBI Revises NRE and FCNR(B) Deposit Interest Rate Ceilings” is: “Update NRE term deposit rate sheets to cap at LIBOR/SWAP plus 50 bps for 1-3 year tenors, effective September 16, 2008.” (RBI issued this 16 Sep 2008).

Circular: RBI/2008-09/170 -- RBI Revises NRE and FCNR(B) Deposit Interest Rate Ceilings
Issued: 16 Sep 2008
Action required: Update NRE term deposit rate sheets to cap at LIBOR/SWAP plus 50 bps for 1-3 year tenors, effective September 16, 2008.
Action required: Adjust FCNR(B) deposit rates to not exceed LIBOR/SWAP minus 25 bps for all maturities, and ensure floating rate deposits use SWAP minus 25 bps with six-month reset.
Action required: Apply revised rates to all new deposits and renewals of existing NRE/FCNR(B) deposits after their current maturity.
Action required: Communicate changes to branch operations and treasury teams to ensure compliance from close of business September 16, 2008.
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=4471&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.