What changed
The earlier circular (August 14, 2013) allowed banks to offer uncapped rates on incremental NRE deposits of 3 years and above, with the benefit of CRR/SLR exemption. This relaxation was set to expire on November 30, 2013. RBI has now extended the same instructions, unchanged, until January 31, 2014, subject to further review.
What it means for you
Banks can continue to use competitive pricing on longer-tenor NRE deposits to attract non-resident rupee funds without worrying about a rate ceiling. The CRR/SLR exemption on these deposits remains a key advantage, helping banks manage liquidity and cost of funds. This extension gives banks more time to leverage this window for mobilizing stable, long-term NRE deposits.
What you must do
- Continue offering uncapped interest rates on incremental NRE deposits with maturity of 3 years and above until January 31, 2014.
- Ensure compliance with the CRR/SLR exemption benefit on these deposits as per the original August 14, 2013 circular.
- Monitor RBI review timelines and prepare for possible changes after January 31, 2014.
- Update internal product documentation and customer communication to reflect the extended validity.
Who it affects
All scheduled commercial banks (excluding RRBs), Treasury and NRE deposit product teams, Non-resident Indian (NRI) customers
Does this circular change the interest rate ceiling on NRE deposits?
No. It only extends the existing deregulation—banks still have freedom to set rates without ceiling on incremental NRE deposits of 3 years and above, unchanged from the August 14, 2013 circular.
What is the benefit of CRR/SLR exemption mentioned?
The original circular allowed banks to pass on the benefit of exemption from CRR and SLR requirements on these specific incremental NRE deposits, which helps reduce the cost of funds for banks.
Is this extension applicable to all NRE deposits?
No, it applies only to incremental NRE deposits with a maturity of 3 years and above, as specified in the August 14, 2013 circular.