NRE Deposit Rate Ceiling Removed for 3+ Year Tenors
Current · Source: Reserve Bank of India · RBI/2013-14/186 · issued 14 Aug 2013 · ~2 min read
Quick answerRBI has freed banks to set any interest rate on NRE deposits of 3 years and above, removing the earlier ceiling that tied them to domestic rupee deposit rates. This temporary relaxation, valid until November 30, 2013, aims to pass on CRR/SLR exemption benefits to depositors.
The rule, in the simplest words
Banks can now set any interest rate they want on NRE (Non-Resident External) deposits that last 3 years or more, without any upper limit.
Before this rule, banks could not pay more interest on NRE deposits than on regular rupee deposits for Indian residents.
This special freedom is only temporary and will end on November 30, 2013, unless RBI extends it.
The old interest rate limit still applies to NRO (Non-Resident Ordinary) accounts, so those rates cannot go above what banks offer on domestic deposits.
Banks get this freedom because they do not have to keep CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) reserves on these long NRE deposits, which saves them money.
How it plays out — a real example
A forex & trade-finance officer in Indore, Priya, notices her bank's NRE deposit rates for 3-year tenors are lower than a competitor's. Using the new RBI rule, she quickly updates her bank's rate sheet to offer a higher, competitive rate on 3-year NRE deposits, attracting more NRI customers before the November 30 deadline.
What changed
Previously, banks could not offer NRE deposit rates higher than comparable domestic rupee deposits. Now, for NRE deposits with maturity of 3 years and above, banks have full freedom to set interest rates without any ceiling. The existing cap on NRO account rates remains unchanged.
What it means for you
Banks can now aggressively price long-tenor NRE deposits to attract non-resident rupee funds, especially as the CRR/SLR exemption on these deposits reduces their cost. This could intensify competition for NRE deposits among banks, potentially raising deposit costs for longer tenors. The relaxation is temporary, expiring on November 30, 2013, subject to review.
What you must do
Review and adjust NRE deposit interest rate slabs for tenors of 3 years and above to remain competitive.
Ensure NRO account interest rates continue to adhere to the existing ceiling.
Monitor the temporary validity period ending November 30, 2013, and plan for potential reversion.
Update internal systems and product literature to reflect the removal of the rate ceiling for eligible NRE deposits.
Who it affects
All scheduled commercial banks (excluding RRBs), Non-resident Indian (NRI) depositors, Treasury and asset-liability management teams, Retail banking product managers
❓ Common questions
Does this circular apply to NRO accounts as well?
No. The ceiling on NRO account interest rates continues as before. Only NRE deposits with maturity of 3 years and above are freed from the rate ceiling.
Is this deregulation permanent?
No. The instructions are valid only up to November 30, 2013, and are subject to review by RBI.
Why has RBI removed the ceiling only for longer-tenor NRE deposits?
To pass on the benefit of the CRR/SLR exemption granted on incremental NRE deposits of 3 years and above, allowing banks to offer higher rates and attract more long-term non-resident rupee funds.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/186
DBOD.Dir.BC. 40 /13.03.00/2013-14
August 14, 2013
All Scheduled Commercial Banks
(Excluding RRBs)
Dear Sir / Madam,
Deregulation of Interest Rates on Non-Resident (External) Rupee (NRE) Deposits
Please refer to our circular DBOD.Dir.BC.64/13.03.00/2011-12 dated December 16, 2011 on Deregulation of Interest Rates on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non- Resident (NRO) Accounts.
2. In terms of para 2 ibid, interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits. However, in order to pass on the benefit of exemption provided on incremental NRE deposits with maturity of 3 years and above from CRR/ SLR requirements, it has been decided to give banks the freedom to offer interest rates on such deposits without any ceiling. The extant ceiling on NRO Accounts shall continue.
3. All other instructions in this regard, as amended from time to time, will remain unchanged.
4. These instructions will be valid up to November 30, 2013, subject to review.
5. An amending directive DBOD.Dir.BC. 39/13.03.00/2013-14 dated August 14, 2013 is enclosed.
Yours faithfully,
(Prakash Chandra Sahoo)
Chief General Manager
DBOD.Dir.BC. 39 /13.03.00/2013-14
August 14, 2013
Deregulation of Interest Rates on Non-Resident (External) Rupee (NRE) Deposits
In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, and in modification of the directive DBOD. Dir. BC. 63/ 13.03.00/ 2011-12 dated December 16, 2011 on Deregulation of Interest Rates on Non-Resident (External) (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby directs that banks are free to offer interest rates without any ceiling on NRE deposits with maturity of 3 years and above. The extant ceiling on NRO Accounts shall continue. These instructions will be valid up to November 30, 2013, subject to review.
(B. Mahapatra)
Executive Director
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/186 · issued 14 Aug 2013. The plain-English explanation above is BankPulse’s own independent summary.
Update internal systems and product literature to reflect the removal of the rate ceiling for eligible NRE deposits.
📜 Compliance
Review and adjust NRE deposit interest rate slabs for tenors of 3 years and above to remain competitive.
Ensure NRO account interest rates continue to adhere to the existing ceiling.
Monitor the temporary validity period ending November 30, 2013, and plan for potential reversion.
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), Non-resident Indian (NRI) depositors, Treasury and asset-liability management teams, Retail banking product managers), your first concrete step on “NRE Deposit Rate Ceiling Removed for 3+ Year Tenors” is: “Review and adjust NRE deposit interest rate slabs for tenors of 3 years and above to remain competitive.” (RBI issued this 14 Aug 2013).
Circular: RBI/2013-14/186 -- NRE Deposit Rate Ceiling Removed for 3+ Year Tenors
Issued: 14 Aug 2013
Action required: Review and adjust NRE deposit interest rate slabs for tenors of 3 years and above to remain competitive.
Action required: Ensure NRO account interest rates continue to adhere to the existing ceiling.
Action required: Monitor the temporary validity period ending November 30, 2013, and plan for potential reversion.
Action required: Update internal systems and product literature to reflect the removal of the rate ceiling for eligible NRE deposits.
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.
💬 Banker Discussion
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=8311&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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