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RBI Caps NRE Deposit Rates for UCBs at LIBOR/SWAP + 50 bps

Current · Source: Reserve Bank of India · RBI/2008-09/184 · issued 19 Sep 2008 · ~2 min read

Quick answerRBI has capped NRE term deposit rates for urban co-operative banks at LIBOR/SWAP plus 50 basis points for 1-3 year maturities, effective September 16, 2008. This replaces the earlier April 2007 benchmark and applies to fresh deposits and renewals.

The rule, in the simplest words

Starting September 16, 2008, urban co-operative banks (UCBs) cannot pay more than LIBOR/SWAP (a global interest rate benchmark) plus 0.50% on NRE (Non-Resident External) deposits for 1 to 3 years.
This new rule applies to both new deposits and renewals of old deposits after they mature.
For deposits longer than 3 years, the same rate cap as for 3-year deposits must be used.
Banks must check the LIBOR/SWAP rate on the last working day of the previous month to set their rates.

How it plays out — a real example

A forex & trade-finance officer in Indore, Priya, is updating the NRE deposit rates at her urban co-operative bank. She checks the LIBOR/SWAP rate for 1-year US dollars from last month, which is 2.00%, and adds 0.50% to get a maximum of 2.50%. She then sets the bank's 1-year NRE deposit rate at 2.50% to comply with the new RBI rule effective September 16, 2008.

What changed

RBI revised the interest rate ceiling on NRE term deposits for UCBs from the previous LIBOR/SWAP rates (effective April 24, 2007) to LIBOR/SWAP rates plus 50 basis points, effective from close of business on September 16, 2008. The new cap applies to fresh deposits of 1-3 year maturity and also to renewals after maturity. For deposits exceeding three years, the three-year rate ceiling applies.

What it means for you

UCBs must now ensure NRE deposit rates do not exceed the new ceiling, which is more restrictive than the earlier benchmark. This could reduce the attractiveness of NRE deposits for customers, potentially impacting deposit mobilization. Banks need to adjust their pricing strategies immediately to comply and avoid penalties under Section 35A of the Banking Regulation Act.

What you must do

Update NRE term deposit interest rates to not exceed LIBOR/SWAP plus 50 bps for 1-3 year maturities, effective September 16, 2008.
Apply the same ceiling to renewals of existing NRE deposits after their maturity.
Ensure compliance with the directive and acknowledge receipt to your regional RBI office.
Review and adjust any NRE deposit products with maturities over three years to use the three-year rate cap.

Who it affects

All Primary (Urban) Cooperative Banks, NRE depositors, Treasury and deposit operations teams at UCBs

❓ Common questions

Regulatory timeline

Stated effective date effective September 16, 2008
Decoded by BankPulse 2026-06-19 12:25 IST

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 deposits?

The ceiling is LIBOR/SWAP rates plus 50 basis points for US dollar of corresponding maturities, as on the last working day of the previous month, for deposits of 1-3 year maturity.

Does this apply to deposits with maturity over three years?

Yes, for deposits exceeding three years, the rate determined for three-year deposits applies.

When does this change take effect?

It takes effect from close of business in India on September 16, 2008.

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

RBI/2008-09/184 

 UBD (PCB) CO BPD Cir No: 16/13.01.000/2008-09 

 September 19, 2008 

 Chief Executive Officer of 

 All Primary (urban) Cooperative Banks 

 Dear Sir/Madam, 

 Interest Rates on Non-Resident (External) Rupee (NRE) Deposits - UCBs 

 Please refer to our circular UBD (PCB) CO BPD Cir No: 37/13.01.000/2006-07 dated April 26, 2007 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 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.

 4. A directive to this effect is enclosed. All other terms and conditions applicable to NRI deposits remain unchanged. 

 5. Please acknowledge receipt to our Regional Office concerned.

 Yours faithfully,

 (A. K. Khound) 

 Chief General Manager in-Charge

 UBD.No.Dir.1 /13.01.000/2008-09 

 September 16, 2008 

 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 modification of directive UBD.No.Dir.2 /13.01.000/2006-07 dated April 26, 2007 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 directs that Interest Rates on Non-Resident (External) Rupee (NRE) Deposits shall be as under:

 " 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."   

 (V.S Das) 

 Executive Director

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/184 · issued 19 Sep 2008. The plain-English explanation above is BankPulse’s own independent summary.

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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All Primary (Urban) Cooperative Banks, NRE depositors, Treasury and deposit operations teams at UCBs), your first concrete step on “RBI Caps NRE Deposit Rates for UCBs at LIBOR/SWAP + 50 bps” is: “Update NRE term deposit interest rates to not exceed LIBOR/SWAP plus 50 bps for 1-3 year maturities, effective September 16, 2008.” (RBI issued this 19 Sep 2008).

Circular: RBI/2008-09/184 -- RBI Caps NRE Deposit Rates for UCBs at LIBOR/SWAP + 50 bps
Issued: 19 Sep 2008
Action required: Update NRE term deposit interest rates to not exceed LIBOR/SWAP plus 50 bps for 1-3 year maturities, effective September 16, 2008.
Action required: Apply the same ceiling to renewals of existing NRE deposits after their maturity.
Action required: Ensure compliance with the directive and acknowledge receipt to your regional RBI office.
Action required: Review and adjust any NRE deposit products with maturities over three years to use the three-year rate cap.
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=4485&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.