Source: Reserve Bank of India · RBI/2011-12/543 · issued 08 May 2012 · ~2 min read
Quick answerRBI raised FCNR(B) deposit rate ceilings for RRBs from May 4, 2012: 1-3 years now LIBOR/Swap +200 bps (was +125), 3-5 years +300 bps (was +125). Floating rate reset period set at six months.
The rule, in the simplest words
For deposits kept for 1 to 3 years, banks can pay interest up to the London rate (LIBOR) plus 2 percent (200 basis points).
For deposits kept for 3 to 5 years, banks can pay interest up to the London rate (LIBOR) plus 3 percent (300 basis points).
If the deposit has a changing interest rate (floating), the rate can be changed every 6 months.
The old limit was London rate plus 1.25 percent for both time periods, but now it is higher.
These new limits started on May 4, 2012, and will stay until the bank changes them again.
How it plays out — a real example
Priya, the treasury head at a Regional Rural Bank, sees the new RBI circular. She updates her FCNR(B) deposit rate card: for a 2-year deposit, she now offers LIBOR + 200 bps instead of the old +125 bps, and for a 4-year deposit, LIBOR + 300 bps. She also sets a reminder to review floating rates every six months.
What changed
The ceiling on interest rates for FCNR(B) deposits held by Regional Rural Banks was increased. For maturities from 1 year to less than 3 years, the cap went from LIBOR/Swap plus 125 basis points to plus 200 basis points. For maturities of 3 to 5 years, the cap went from plus 125 basis points to plus 300 basis points. The change took effect from the close of business in India on May 4, 2012.
What it means for you
RRBs can now offer higher rates on FCNR(B) deposits, making them more competitive for attracting non-resident foreign currency funds. The higher caps give RRBs more flexibility to price deposits in line with market conditions. The six-month reset period for floating rate deposits remains a key operational parameter.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Update FCNR(B) deposit rate sheets to reflect the new ceilings (200 bps for 1-3 years, 300 bps for 3-5 years).
Ensure floating rate deposits use a six-month interest reset period.
Communicate revised rates to branches and treasury teams.
Review existing FCNR(B) deposit pricing to stay within the new caps.
Who it affects
Regional Rural Banks (RRBs), Treasury and ALM desks at RRBs, Deposit operations teams, Non-resident depositors with FCNR(B) accounts
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn03 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the new interest rate ceiling for FCNR(B) deposits with maturity of 2 years?
For maturities from 1 year to less than 3 years, the ceiling is LIBOR/Swap plus 200 basis points, effective from May 4, 2012.
Does the six-month reset period apply to all floating rate FCNR(B) deposits?
Yes, the circular states that for floating rate deposits, the interest reset period shall be six months.
Are these rates applicable to existing deposits?
The circular does not specify retroactive application; it states the rates apply with effect from close of business on May 4, 2012, so it likely applies to new or renewed deposits.
📜 This document’s life story (2 recorded events, each backed by RBI’s own words)
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/543 · issued 08 May 2012. The plain-English explanation above is BankPulse’s own independent summary.
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 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=7192&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.
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