What changed
The ceiling rate for FCNR(B) deposits of all maturities was increased from LIBOR/SWAP rates plus 25 basis points to plus 100 basis points, effective from close of business on November 15, 2008. For floating rate deposits, the ceiling is now SWAP rates plus 100 bps, with a 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 move aims to boost foreign currency inflows amid prevailing market conditions. Lenders should update their deposit pricing models and systems to reflect the new ceiling.
What you must do
- Update FCNR(B) deposit interest rate ceilings to LIBOR/SWAP plus 100 bps for all maturities effective November 15, 2008.
- Ensure floating rate deposits use SWAP rates plus 100 bps with a six-month reset period.
- Communicate revised rates to branches and treasury teams immediately.
- Review and amend existing deposit contracts to comply with the new directive.
Who it affects
Banks offering FCNR(B) deposit accounts, Non-resident depositors, Treasury and ALM teams, Compliance departments
What is the new interest rate ceiling for FCNR(B) deposits?
The ceiling is LIBOR/SWAP rates plus 100 basis points for all maturities, effective from November 15, 2008.
Does this apply to floating rate FCNR(B) deposits?
Yes, floating rate deposits also have a ceiling of SWAP rates plus 100 bps, with a six-month interest reset period.
When did this change take effect?
The change is effective from the close of business in India as on November 15, 2008.