What changed
The ceiling rate for 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 close of business on October 15, 2008. For floating rate deposits, the ceiling is now SWAP rates plus 25 bps with a six-month reset period.
What it means for you
UCBs can now offer more competitive rates on FCNR(B) deposits, potentially attracting more foreign currency inflows. This gives banks greater flexibility in pricing these deposits, but they must stay within the new ceiling. The change reverses the earlier reduction, signaling a shift in RBI's stance to support deposit mobilization.
What you must do
- Update FCNR(B) deposit interest rate slabs to reflect the new ceiling of LIBOR/SWAP plus 25 bps for all maturities.
- Ensure floating rate deposits use SWAP rates plus 25 bps as the ceiling with a six-month reset period.
- Communicate the revised rates to branch managers and treasury teams for immediate implementation.
- Acknowledge receipt of this circular to your respective Regional Office.
Who it affects
AD Category-I Urban Co-operative Banks (UCBs), Treasury departments of UCBs, Depositors holding or considering FCNR(B) accounts
What is the new interest rate ceiling for FCNR(B) deposits?
The ceiling is LIBOR or SWAP rates plus 25 basis points for the respective currency and maturity, effective from October 15, 2008.
Does this apply to floating rate FCNR(B) deposits?
Yes, for floating rate deposits, the ceiling is SWAP rates plus 25 bps, with interest reset every six months.
When did the previous ceiling of minus 25 bps apply?
The earlier ceiling of LIBOR/SWAP minus 25 bps was effective from close of business on September 16, 2008, until this revision.