What changed
The maximum interest rate on fresh NRE term deposits (1-3 years) was increased from LIBOR/SWAP plus 50 basis points to LIBOR/SWAP plus 100 basis points, effective from close of business on October 15, 2008. The same cap applies for deposits exceeding three years. Renewals of existing NRE deposits also fall under the new ceiling.
What it means for you
Co-operative banks can now offer higher rates on NRE deposits, potentially improving their ability to attract non-resident rupee funds. This gives them more pricing flexibility in a competitive deposit market, but they must still ensure rates do not exceed the revised cap. The move aligns with broader RBI efforts to manage forex flows and deposit competitiveness.
What you must do
- Update NRE term deposit rate sheets to reflect the new ceiling of LIBOR/SWAP plus 100 bps for 1-3 year maturities.
- Ensure all fresh NRE deposits and renewals from October 15, 2008 comply with the revised cap.
- Monitor LIBOR/SWAP rates monthly to calculate applicable maximum rates accurately.
- Communicate the revised rate structure to branch managers and treasury teams.
Who it affects
State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs), NRE depositors with co-operative banks
Does the new cap apply to NRE deposits with maturity beyond three years?
Yes, the rate determined for three-year deposits also applies to deposits with maturity exceeding three years.
Are existing NRE deposits affected by this change?
Only renewals of existing NRE deposits after their current maturity period are subject to the new cap. Existing deposits continue at their contracted rates until maturity.