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RBI Hikes NRE and FCNR(B) Deposit Rate Ceilings

Current · Source: Reserve Bank of India · RBI/2008-09/281 · issued 15 Nov 2008 · ~2 min read

Quick answerRBI raised NRE term deposit rate ceiling to LIBOR/SWAP plus 175 bps (from plus 100 bps) and FCNR(B) ceiling to LIBOR/SWAP plus 100 bps (from plus 25 bps), effective November 15, 2008, to attract non-resident inflows amid market conditions.

The rule, in the simplest words

Banks can now pay up to LIBOR/SWAP (a global interest rate benchmark) plus 175 basis points (1.75%) on NRE term deposits (1-3 years), up from plus 100 bps.
For FCNR(B) deposits (foreign currency accounts for NRIs) of any length, the maximum interest rate is LIBOR/SWAP plus 100 bps (1%), up from plus 25 bps.
Floating-rate FCNR(B) deposits must use SWAP rates plus 100 bps, and the interest rate can change every six months.
These new higher ceilings apply from November 15, 2008, for fresh deposits and renewals of existing deposits after their maturity.
Banks must check LIBOR/SWAP rates each month to make sure they don't go over the new ceiling.

How it plays out — a real example

A forex & trade-finance officer in Indore, Priya, updates her bank's NRE deposit rate sheets on November 15, 2008, to show the new ceiling of LIBOR/SWAP plus 175 bps. She then calls an NRI customer in Dubai to offer a 2-year NRE deposit at the higher rate, explaining that the bank can now pay more because the RBI raised the limit, helping the customer earn better returns while the bank attracts more foreign funds.

What changed

For NRE term deposits (1-3 years), the maximum interest rate was increased from LIBOR/SWAP plus 100 bps to plus 175 bps. For FCNR(B) deposits of all maturities, the ceiling was raised from LIBOR/SWAP plus 25 bps to plus 100 bps. Floating rate FCNR(B) deposits now use SWAP rates plus 100 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 boost non-resident foreign currency inflows and ease domestic liquidity. However, higher deposit costs may compress net interest margins for banks, especially those with large NRE/FCNR(B) books.

What you must do

Update NRE and FCNR(B) deposit rate slabs to reflect the new ceilings effective November 15, 2008.
Communicate revised rates to branches and NRI customers to capture inflows.
Monitor LIBOR/SWAP rates monthly to ensure compliance with the ceiling calculation.
Review asset-liability management to manage the impact of higher deposit costs on margins.

Who it affects

All scheduled commercial banks (excluding RRBs) offering NRE/FCNR(B) deposits, NRI depositors and remittance channels, Treasury and ALM desks managing foreign currency liabilities

❓ Common questions

Regulatory timeline

Stated effective date effective November 15, 2008
Decoded by BankPulse 2026-06-19 11:36 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What is the new NRE deposit rate ceiling?

For fresh NRE term deposits of 1-3 years, the rate cannot exceed LIBOR/SWAP plus 175 bps (up from plus 100 bps), based on the last working day of the previous month for corresponding USD maturities.

Does this apply to renewals of existing NRE deposits?

Yes, the revised ceiling applies to NRE deposits renewed after their current maturity period, effective from November 15, 2008.

What changed for FCNR(B) floating rate deposits?

Floating rate FCNR(B) deposits now have a ceiling of SWAP rates plus 100 bps, with a mandatory six-month interest reset period.

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

RBI/2008-09/281
DBOD. 
No. Dir. BC. 82 /13.03.00/2008-09
 November 
15, 2008
 All Scheduled Commercial Banks
 (Excluding RRBs)
 Dear 
Sir,
 Interest Rates on Non-Resident (External) Rupee (NRE) Deposits 
and FCNR(B) deposits
 1. Interest Rates on Non-Resident (External) Rupee 
(NRE) Deposits
 Please refer to paragraph 1 of our circular 
 DBOD.No.Dir.BC.64/13.03.00/2008-09 
dated October 15, 2008 on Interest Rates on Deposits held in Non-Resident 
(External) Rupee (NRE) Accounts. In view of the prevailing market conditions, 
it has been decided that until further notice and with effect from close of business 
in India as on November 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 175 basis points, as 
on the last working day of the previous month, for US dollar of corresponding 
maturities (as against LIBOR / SWAP rates plus 100 basis points effective from 
the close of business on October 15, 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 No. DBOD. 
Dir. BC 64 / 13.03.00 / 2008-09 dated October 15, 2008 on Interest Rates on 
Deposits held in FCNR(B) Accounts. It has also been decided that until further 
notice and with effect from the close of business in India as on November 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 November 15, 2008, interest shall be paid within the 
ceiling rate of LIBOR / SWAP rates plus 100 basis points for the respective currency 
/ corresponding maturities (as against LIBOR / SWAP rates plus 25 basis points 
effective from close of business on October 15, 2008). On floating rate deposits, 
interest shall be paid within the ceiling of SWAP rates for the respective currency 
/ maturity plus 100 basis points. For floating rate deposits, the interest reset 
period shall be six months.
 3.  All other instructions, 
as contained in our Master Circulars DBOD. Dir. 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. 81 / 13.03.00/2008-09 dated November 15, 2008 
is enclosed.
 Yours faithfully
 (Vinay 
Baijal) 
 Chief General Manager
 DBOD. 
No. Dir. BC. 81 /13.03.00/2008-09 
 November 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.63/13.03.00/2008-09 
dated October 15, 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 November 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 175 basis points, as on 
the last working day of the previous month, for US dollar of corresponding maturities 
(as against LIBOR / SWAP rates plus 100 basis points effective from the close 
of business on October 15, 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 
FCNR(B) Deposits
 ' In respect of FCNR (B) deposits of 
all maturities contracted effective from the close of business in India as on 
November 15, 2008, interest shall be paid within the ceiling rate of LIBOR / SWAP 
rates plus 100 basis points for the respective currency / corresponding maturities 
(as against LIBOR / SWAP rates plus 25 basis points effective from the close of 
business on October 15, 2008). On floating rate deposits, interest shall be paid 
within the ceiling of SWAP rates for the respective currency / maturities plus 
100 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/2008-09/281 · issued 15 Nov 2008. The plain-English explanation above is BankPulse’s own independent summary.

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Who does what — compliance checklist

🏦 Branch Manager

Communicate revised rates to branches and NRI customers to capture inflows.

📜 Compliance

Update NRE and FCNR(B) deposit rate slabs to reflect the new ceilings effective November 15, 2008.
Monitor LIBOR/SWAP rates monthly to ensure compliance with the ceiling calculation.
Review asset-liability management to manage the impact of higher deposit costs on margins.

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/FCNR(B) deposits, NRI depositors and remittance channels, Treasury and ALM desks managing foreign currency liabilities), your first concrete step on “RBI Hikes NRE and FCNR(B) Deposit Rate Ceilings” is: “Update NRE and FCNR(B) deposit rate slabs to reflect the new ceilings effective November 15, 2008.” (RBI issued this 15 Nov 2008).

Circular: RBI/2008-09/281 -- RBI Hikes NRE and FCNR(B) Deposit Rate Ceilings
Issued: 15 Nov 2008
Action required: Update NRE and FCNR(B) deposit rate slabs to reflect the new ceilings effective November 15, 2008.
Action required: Communicate revised rates to branches and NRI customers to capture inflows.
Action required: Monitor LIBOR/SWAP rates monthly to ensure compliance with the ceiling calculation.
Action required: Review asset-liability management to manage the impact of higher deposit costs on margins.
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=4644&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.