Home › Circulars › RBI/2013-14/477

FCNR(B) Deposit Rate Ceiling Extended, Then Cut for 3-5 Year Tenor

Current · Source: Reserve Bank of India · RBI/2013-14/477 · issued 31 Jan 2014 · ~2 min read
Quick answerRBI extended the higher FCNR(B) deposit rate ceiling (LIBOR/Swap + 400 bps for 3-5 years) until Feb 28, 2014. From March 1, 2014, the ceiling for 3-5 years will revert to LIBOR/Swap + 300 bps. The 1-3 year ceiling remains at LIBOR/Swap + 200 bps.
The rule, in the simplest words
How it plays out — a real example

Arjun, a senior relationship manager at a Mumbai bank, is meeting a corporate client who wants to lock in a 4‑year FCNR(B) deposit. He uses the new 300‑bps ceiling to set a competitive rate that still keeps the bank within RBI limits, and explains the change in a friendly, reassuring tone so the client feels confident in the decision.

What changed

The interest rate ceiling on FCNR(B) deposits for the 3-5 year maturity period, which was raised to LIBOR/Swap plus 400 basis points in August 2013, will continue until February 28, 2014. From March 1, 2014, it will revert to the pre-August 2013 level of LIBOR/Swap plus 300 basis points. The ceiling for 1-3 year deposits stays unchanged at LIBOR/Swap plus 200 basis points.

What it means for you

Banks get an extra month (until end-Feb 2014) to offer the higher 400 bps spread on 3-5 year FCNR(B) deposits, which may help them attract more foreign currency deposits in the short term. From March 1, the lower 300 bps spread will reduce the cost advantage for banks raising longer-tenor FCNR(B) funds, potentially making these deposits less attractive to customers. Banks should plan their FCNR(B) pricing and deposit mobilization strategies accordingly before the March 1 change.

What you must do

Who it affects

All scheduled commercial banks (excluding RRBs) offering FCNR(B) deposits, Treasury and asset-liability management teams, Retail and corporate customers holding or planning FCNR(B) deposits

❓ Common questions

What is the new FCNR(B) interest rate ceiling for 3-5 year deposits from March 1, 2014?

From March 1, 2014, the ceiling for 3-5 year FCNR(B) deposits will be LIBOR/Swap plus 300 basis points, down from the current LIBOR/Swap plus 400 basis points.

Does the 1-3 year FCNR(B) deposit ceiling change?

No, the ceiling for 1 year to less than 3 years remains unchanged at LIBOR/Swap plus 200 basis points both before and after March 1, 2014.

Why did RBI extend the higher ceiling until February 28, 2014?

RBI stated it was giving banks some additional time before reverting to the pre-August 2013 ceiling, likely to allow banks to adjust their deposit pricing and funding strategies.

📜 Read the original circular — full text as issued by RBI
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On a review and in order to give banks some time, it has been decided that the interest rate ceiling on FCNR (B) deposits prescribed vide circular dated August 14, 2013, referred to above, will continue till February 28, 2014 and will revert to the ceiling prior to August 14, 2013, as under: Maturity Period Existing With effect from March 1, 2014 1 year to less than 3 years LIBOR/Swap plus 200 basis points No change 3 - 5 years LIBOR/Swap plus 400 basis points LIBOR/SWAP plus 300 basis points 3. All other instructions in this regard, as amended from time to time, will remain unchanged. 4. An amending directive DBOD.No.Dir.BC.91/13.03.00/2013-14 dated January 31, 2014 is enclosed . Yours faithfully, (Prakash Chandra Sahoo) Chief General Manager Encl: As above DBOD.Dir.BC.91/13.03.00/2013-14 January 31, 2014 Interest Rates on FCNR(B) Deposits In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, and in modification of the directive DBOD.No.Dir.BC.72/13.03.00/2013-14 dated November 29, 2013 on Interest Rates on FCNR(B) Deposits, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby directs that the interest rate ceiling on FCNR (B) deposits prescribed vide Directive DBOD. Dir.BC.37/13.03.00/2013-14 dated August 14, 2013 will continue till February 28, 2014 and will revert to the ceiling prior to August 14, 2013, as under: Maturity Period Existing With effect from March 1, 2014 1 year to less than 3 years LIBOR/Swap plus 200 basis points No change 3 - 5 years LIBOR/Swap plus 400 basis points LIBOR/ SWAP plus 300 basis points (B. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/477 · issued 31 Jan 2014. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
🏦 Branch Manager
  • Communicate the revised rate ceiling to your treasury, branch network, and product teams to ensure compliance from March 1.
💻 IT / Systems
  • Update your FCNR(B) deposit interest rate slabs and system parameters to reflect the new ceiling for 3-5 year deposits effective March 1, 2014.
📜 Compliance
  • Review your FCNR(B) deposit mobilization targets and pricing strategy for the 3-5 year bucket, considering the lower spread from March.
  • Monitor LIBOR/Swap rates closely to price deposits competitively within the new ceiling.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are an IT/Systems lead at a bank this circular applies to (All scheduled commercial banks (excluding RRBs) offering FCNR(B) deposits, Treasury and asset-liability management teams, Retail and corporate customers holding or planning FCNR(B) deposits), your first concrete step on “FCNR(B) Deposit Rate Ceiling Extended, Then Cut for 3-5 Year Tenor” is: “Update your FCNR(B) deposit interest rate slabs and system parameters to reflect the new ceiling for 3-5 year deposits effective March 1, 2014.” (RBI issued this 31 Jan 2014).

  1. Circular: RBI/2013-14/477 -- FCNR(B) Deposit Rate Ceiling Extended, Then Cut for 3-5 Year Tenor
  2. Issued: 31 Jan 2014
  3. Action required: Update your FCNR(B) deposit interest rate slabs and system parameters to reflect the new ceiling for 3-5 year deposits effective March 1, 2014.
  4. Action required: Communicate the revised rate ceiling to your treasury, branch network, and product teams to ensure compliance from March 1.
  5. Action required: Review your FCNR(B) deposit mobilization targets and pricing strategy for the 3-5 year bucket, considering the lower spread from March.
  6. Action required: Monitor LIBOR/Swap rates closely to price deposits competitively within the new ceiling.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. 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.

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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=8724&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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