What changed
The interest rate ceiling on FCNR(B) deposits of all maturities was revised from LIBOR/SWAP rates minus 25 basis points to LIBOR/SWAP rates plus 25 basis points, effective from the close of business on October 15, 2008. For floating rate deposits, the ceiling is now SWAP rates plus 25 basis points, with a mandatory six-month interest reset period.
What it means for you
Banks can now offer higher interest rates on FCNR(B) deposits, making them more attractive to non-resident depositors. This change reverses the previous reduction and may help banks mobilize foreign currency deposits amid market conditions. The six-month reset period for floating rate deposits ensures periodic rate adjustments aligned with market benchmarks.
What you must do
- Update FCNR(B) deposit interest rate ceilings to LIBOR/SWAP plus 25 bps for all new deposits from October 15, 2008.
- Ensure floating rate FCNR(B) deposits have a six-month interest reset period as mandated.
- Communicate the revised rate structure to branch operations and treasury teams immediately.
- Review existing FCNR(B) deposit pricing strategies to remain competitive within the new ceiling.
Who it affects
Banks offering FCNR(B) deposit accounts, Non-resident depositors holding or opening FCNR(B) accounts, Treasury and ALM teams managing foreign currency liabilities
What is the new interest rate ceiling for FCNR(B) deposits?
For all maturities, the ceiling is LIBOR/SWAP rates plus 25 basis points, effective from October 15, 2008.
Does this apply to existing FCNR(B) deposits?
No, the revised ceiling applies only to deposits contracted from the close of business on October 15, 2008 onward.
What is the reset period for floating rate FCNR(B) deposits?
The interest reset period for floating rate deposits must be six months.