What changed
The cap on NRE term deposit rates for UCBs was increased from LIBOR/SWAP plus 175 basis points to plus 275 basis points. This change applies to fresh deposits of 1-3 year tenor and renewals, effective from close of business on November 23, 2011.
What it means for you
UCBs can now offer higher rates on NRE deposits, making them more competitive against other banks. This could help attract more NRE inflows but may also increase funding costs. The move aligns with prevailing market conditions to support deposit mobilisation.
What you must do
- Update your NRE deposit interest rate slabs to reflect the new ceiling of LIBOR/SWAP plus 275 bps for 1-3 year tenors.
- Ensure all fresh NRE deposits and renewals from November 23, 2011 comply with the revised cap.
- Communicate the revised rates to your branches and treasury team for implementation.
- Monitor LIBOR/SWAP rates monthly to set compliant deposit rates.
Who it affects
Primary (Urban) Co-operative Banks, NRE depositors, Treasury and deposit operations teams at UCBs
Does the new rate cap apply to NRE deposits with maturity beyond three years?
Yes, the rate determined for three-year deposits will also apply to deposits with maturity exceeding three years.
Are existing NRE deposits affected by this circular?
The revised cap applies to fresh deposits and renewals after maturity. Existing deposits are not impacted unless renewed.