RBI allows coop banks to fix NRE deposit rates

The Reserve Bank of India (RBI) today allowed cooperative and primary urban cooperative banks to fix their interest rates on various non-resident deposit schemes.

Extending the ambit of its recent decision to deregulate deposit rates, RBI said, "Banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident [External] Rupee deposit accounts and savings deposits under Ordinary Non-Resident accounts with immediate effect."

The RBI issued two separate circulars addressed to primary urban cooperative banks and state and central cooperative banks.

The apex bank, earlier this month, freed interest rates on various non-resident deposit schemes by scheduled commercial banks, a move intended attract more funds from NRIs and arrest the slide in rupee in the forex market.

It had also put restrictions on forward contract in rupee to check speculations in the forex market.

The RBI had already freed the saving and deposit rates for resident bank customers.

The deregulation in rates on NRE and NRO deposits is intended to make such funds more attractive at a time when the rupee has depreciated sharply during last few months.

The RBI in its last monetary review said it is closely watching the rupee situation and will respond to it as appropriate.

The rupee has depreciated by over 15% in 2011 so far against the US dollar.