What changed
RBI increased the interest rate ceiling on fresh FCNR(B) deposits effective December 6, 2024. For deposits of 1 year to less than 3 years, the ceiling rose from overnight ARR plus 250 bps to plus 400 bps. For deposits of 3 years and above up to 5 years, the ceiling rose from overnight ARR plus 350 bps to plus 500 bps.
What it means for you
Banks can now offer higher rates on FCNR(B) deposits, making them more attractive to non-resident depositors. This move aims to boost foreign currency inflows and support the balance of payments. The higher ceilings are temporary, available only until March 31, 2025, so banks should act quickly to mobilize deposits.
What you must do
- Update FCNR(B) deposit product rates to reflect the new ceilings immediately.
- Communicate the revised rates to branch networks and marketing teams to attract NRIs.
- Monitor deposit mobilization against the March 31, 2025 deadline to maximize inflows.
- Ensure compliance with the overnight ARR benchmarks for each currency.
Who it affects
Scheduled Commercial Banks, Regional Rural Banks, Small Finance Banks, Local Area Banks, Payments Banks, Primary Urban Co-operative Banks, District Central Co-operative Banks, State Co-operative Banks
What is the new ceiling for 1-3 year FCNR(B) deposits?
The ceiling is now overnight Alternative Reference Rate (ARR) for the respective currency/swap plus 400 basis points, up from the earlier plus 250 bps.
Until when are these higher ceilings valid?
The relaxation is available only for fresh deposits raised from December 6, 2024, until March 31, 2025.
Which banks are covered by this circular?
All scheduled commercial banks, including regional rural banks, small finance banks, local area banks, payments banks, and all co-operative banks (urban, district, and state) are covered.