Home › Circulars › RBI/2008-09/230

RBI Hikes NRE and FCNR(B) Deposit Rate Ceilings

Current · Source: Reserve Bank of India · RBI/2008-09/230 · issued 15 Oct 2008 · ~2 min read

Quick answerRBI raised the interest rate ceiling on NRE term deposits (1-3 years) to LIBOR/SWAP + 100 bps (from +50 bps) and on FCNR(B) deposits to LIBOR/SWAP + 25 bps (from -25 bps), effective October 15, 2008. This aims to attract non-resident deposits amid global financial stress.

The rule, in the simplest words

Banks can now pay more interest on NRE deposits (for 1-3 years) — up to LIBOR/SWAP (a global interest rate) plus 100 basis points (1% extra), instead of the old plus 50 basis points.
Banks can also pay more interest on FCNR(B) deposits (foreign currency deposits) — up to LIBOR/SWAP plus 25 basis points (0.25% extra), instead of the old minus 25 basis points.
For floating-rate FCNR(B) deposits (where interest changes over time), the ceiling is SWAP plus 25 basis points, and the rate must be reset every six months.
These new higher ceilings start from October 15, 2008, and apply to fresh deposits and renewals of old deposits after they mature.

How it plays out — a real example

A forex & trade-finance officer in Indore, Priya, updates her bank's NRE deposit rate sheet on October 15, 2008. She sees the new ceiling allows her to offer 1% more interest than before, so she calls her NRI customer, Mr. Sharma, and says, 'Your 2-year NRE deposit can now earn a higher rate, making it more attractive than last month.' She then checks the latest LIBOR rate to set a competitive rate that stays within the new limit.

What changed

The ceiling on NRE term deposits (1-3 years) was increased from LIBOR/SWAP + 50 bps to +100 bps. For FCNR(B) deposits of all maturities, the ceiling moved from LIBOR/SWAP - 25 bps to +25 bps. Floating rate FCNR(B) deposits now have a ceiling of SWAP + 25 bps with a six-month reset period.

What it means for you

Banks can now offer higher rates on NRE and FCNR(B) deposits, making them more attractive to NRIs. This should help stem outflows and boost foreign currency inflows. The wider spreads give banks more pricing flexibility but may compress margins if competition heats up.

What you must do

Update your NRE and FCNR(B) deposit rate sheets to reflect the new ceilings immediately.
Communicate revised rates to branch staff and ensure compliance with the October 15, 2008 effective date.
Monitor LIBOR/SWAP rates monthly to set competitive yet compliant deposit rates.
Review renewal pricing for existing NRE deposits maturing after October 15, 2008.

Who it affects

All scheduled commercial banks (excluding RRBs) offering NRE and FCNR(B) deposit accounts, Treasury and ALM teams managing non-resident deposit pricing, NRI customers and relationship managers

❓ Common questions

Regulatory timeline

Stated effective date effective October 15, 2008
Decoded by BankPulse 2026-06-19 12:00 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 term deposits?

For fresh NRE term deposits of 1-3 years maturity, the ceiling is LIBOR/SWAP rates plus 100 basis points for the corresponding US dollar maturity, effective from October 15, 2008.

Does this change apply to existing FCNR(B) deposits?

No, the new ceiling applies only to FCNR(B) deposits contracted on or after October 15, 2008. Existing deposits are not affected.

What is the interest reset period for floating rate FCNR(B) deposits?

For floating rate FCNR(B) deposits, the interest reset period is six months, and the ceiling is SWAP rates plus 25 basis points.

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

RBI/2008-09/230

 DBOD. No. Dir. BC. 64/13.03.00/2008-09 

 October 15, 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 1 of our circular DBOD. No. Dir. BC. 44 /13.03.00/2008-09 dated September 16, 2008 on Interest Rates on Deposits held in Non-Resident (External) Rupee (NRE) Accounts. On a review, it has been decided that until further notice and with effect from close of business in India as on October 15, 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 100 basis points, as on the last working day of the previous month, for US dollar of corresponding maturities (as against LIBOR / SWAP rates plus 50 basis points effective from the close of business on September 16, 2008). 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 2 of our circular dated September 16, 2008 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 October 15, 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 October 15, 2008, interest shall be paid within the ceiling rate of LIBOR / SWAP rates plus 25 basis points for the respective currency / corresponding maturities (as against LIBOR / SWAP rates minus 25 basis points effective from close of business on September 16, 2008). On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency / maturity plus 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.63 /13.03.00/2008-09 dated October 15, 2008 is enclosed. 

 Yours faithfully

 (P. Vijaya Bhaskar) 

 Chief General Manager

 DBOD. No. Dir. BC. 63 /13.03.00/2008-09  

 October 15, 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.43A/13.03.00/2008-09 dated September 16, 2008 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 October 15, 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 100 basis points, as on the last working day of the previous month, for US dollar of corresponding maturities (as against LIBOR / SWAP rates plus 50 basis points effective from the close of business on September 16, 2008). 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 October 15, 2008, interest shall be paid within the ceiling rate of LIBOR / SWAP rates plus 25 basis points for the respective currency / corresponding maturities (as against LIBOR / SWAP rates minus 25  basis points effective from the close of business on September 16, 2008). On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency / maturity plus 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/2008-09/230 · issued 15 Oct 2008. The plain-English explanation above is BankPulse’s own independent summary.

🧰 Tools — save, print, templates & related

Most relevant forTreasury Team / ALM NRI Relationship Manager Product Manager (Digital & Lending)Branch Manager — Private Bank / SFB Branch Operations (Accounts / FD / CASA)Compliance Team

🛠 Banker’s toolkit — checklists & reply templates →

Related circulars · Department of Regulation

SFB Pillar 3 Disclosure Norms Aligned with Basel UCB Deposit Rate Disclosure & Uniformity Rules Updated LAB Deposit Rate Disclosure & Uniformity Rules Tightened Payments Banks: Interest Rates Must Match Disclosed Schedule RBI Updates Bulk Deposit Rate Rules and Disclosure Timing

Browse all departments →

Who does what — compliance checklist

🏦 Branch Manager

Communicate revised rates to branch staff and ensure compliance with the October 15, 2008 effective date.

📜 Compliance

Update your NRE and FCNR(B) deposit rate sheets to reflect the new ceilings immediately.
Monitor LIBOR/SWAP rates monthly to set competitive yet compliant deposit rates.
Review renewal pricing for existing NRE deposits maturing after October 15, 2008.

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, Treasury and ALM teams managing non-resident deposit pricing, NRI customers and relationship managers), your first concrete step on “RBI Hikes NRE and FCNR(B) Deposit Rate Ceilings” is: “Update your NRE and FCNR(B) deposit rate sheets to reflect the new ceilings immediately.” (RBI issued this 15 Oct 2008).

Circular: RBI/2008-09/230 -- RBI Hikes NRE and FCNR(B) Deposit Rate Ceilings
Issued: 15 Oct 2008
Action required: Update your NRE and FCNR(B) deposit rate sheets to reflect the new ceilings immediately.
Action required: Communicate revised rates to branch staff and ensure compliance with the October 15, 2008 effective date.
Action required: Monitor LIBOR/SWAP rates monthly to set competitive yet compliant deposit rates.
Action required: Review renewal pricing for existing NRE deposits maturing after October 15, 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.

💬 Banker Discussion

Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.

Loading comments…

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=4546&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.