What changed
For FCNR(B) deposits with a maturity of 3 to 5 years, the interest rate ceiling has been increased from LIBOR/Swap plus 300 basis points to LIBOR/Swap plus 400 basis points. The ceiling for deposits of 1 year to less than 3 years remains at LIBOR/Swap plus 200 basis points. Floating rate deposits must use a six-month reset period and stay within the revised ceiling.
What it means for you
AD Category-1 UCBs can now offer higher rates on 3-5 year FCNR(B) deposits, making them more attractive to NRI depositors. This move aims to boost foreign currency inflows amid market conditions. Banks must ensure floating rate deposits comply with the six-month reset rule and the new ceiling.
What you must do
- Update FCNR(B) deposit interest rate slabs for 3-5 year tenors to LIBOR/Swap plus 400 bps maximum.
- Ensure floating rate FCNR(B) deposits have a six-month interest reset period.
- Communicate revised rates to branches and NRI customers before November 30, 2013.
- Monitor compliance with the directive and prepare for possible review after the validity period.
Who it affects
AD Category-1 Urban Co-operative Banks (UCBs), NRI depositors holding FCNR(B) accounts, Treasury and deposit operations teams at UCBs
What is the new interest rate ceiling for 3-5 year FCNR(B) deposits?
The ceiling has been raised from LIBOR/Swap plus 300 bps to LIBOR/Swap plus 400 bps, effective from August 14, 2013.
Are there any changes for 1-3 year FCNR(B) deposits?
No, the ceiling for 1 year to less than 3 years remains unchanged at LIBOR/Swap plus 200 bps.
How long are these revised rates valid?
These instructions are valid up to November 30, 2013, subject to review by RBI.