What changed
The ceiling rate for FCNR(B) deposits of all maturities was increased from LIBOR/SWAP rates minus 75 basis points to minus 25 basis points. For floating rate deposits, the ceiling is now SWAP rates minus 25 bps, with a six-month reset period.
What it means for you
Banks can now offer more competitive rates on FCNR(B) deposits, potentially attracting more foreign currency inflows. This change gives lenders greater flexibility to price deposits closer to market rates, which may improve their ability to raise foreign currency funds.
What you must do
- Update your FCNR(B) deposit interest rate slabs to reflect the new ceiling of LIBOR/SWAP minus 25 bps.
- Communicate the revised rates to your treasury and branch operations teams immediately.
- Ensure floating rate deposit contracts specify a six-month interest reset period as mandated.
- Review your current FCNR(B) portfolio to assess the impact on funding costs and margins.
Who it affects
Banks offering FCNR(B) deposit accounts, Treasury departments managing foreign currency liabilities, Non-resident Indian (NRI) depositors
What is the new ceiling rate for FCNR(B) deposits?
The ceiling is LIBOR or SWAP rates minus 25 basis points for the respective currency and maturity, effective from September 16, 2008.
Does this apply to floating rate FCNR(B) deposits?
Yes, floating rate deposits also have a ceiling of SWAP rates minus 25 bps, with a mandatory six-month interest reset period.
When did this change take effect?
It applies to deposits contracted from the close of business in India on September 16, 2008.