What changed
The earlier circular allowing RRBs to set interest rates on incremental NRE deposits (3 years and above) without any ceiling, which was valid until November 30, 2013, has been extended unchanged until January 31, 2014. The exemption from CRR/SLR requirements on such deposits continues to apply.
What it means for you
RRBs can continue to offer competitive rates on longer-tenure NRE deposits to attract non-resident rupee funds without regulatory caps. This helps banks manage liquidity and deposit growth, especially as the exemption from reserve requirements improves their cost of funds. The extension gives RRBs more time to leverage this flexibility for mobilizing NRE deposits.
What you must do
- Update your NRE deposit product offerings to reflect the extended validity of uncapped rates for 3-year and above tenures.
- Review your deposit mobilization strategy to maximize the benefit of CRR/SLR exemption on incremental NRE deposits.
- Communicate the extension to your treasury and branch teams to ensure consistent pricing and compliance.
- Monitor market rates and adjust your NRE deposit rates competitively within the allowed framework.
Who it affects
Regional Rural Banks (RRBs), NRE deposit customers, Treasury and deposit operations teams at RRBs
What is the key change in this circular?
The circular extends the validity of the earlier directive that allows RRBs to offer interest rates on incremental NRE deposits with a maturity of 3 years and above without any ceiling. This freedom, originally set to expire on November 30, 2013, now remains in force until January 31, 2014, subject to review.
Does the CRR/SLR exemption still apply?
Yes, the exemption from CRR and SLR requirements on such incremental NRE deposits continues as per the original circular, and the current extension does not alter that benefit.
What should RRBs do to comply?
RRBs should ensure their deposit pricing policies reflect the extended period, update internal circulars, and continue to offer uncapped rates on eligible NRE deposits while adhering to the directive's terms.