SBI, Union Bank raise interest rates on FCNR-B deposits

Banks have started raising the interest rates on foreign currency non-resident (banks) deposits (FCNR-B) after the Reserve Bank of India raised the ceiling on these deposits to attract foreign inflows from non-resident Indians (NRIs).

The revised rates for one year to less than two years for dollars deposits is 3.05 per cent, compared with 2.30 per cent earlier. For five years, the maturity bracket the new rate is 4.11 per cent, against the old rate of 2.36 per cent, State Bank of India (SBI) said in a statement.

The central bank had, on Friday, raised the ceiling from 125 basis points (bps) to 200 bps above the corresponding London interbank offered rate/swap rates for deposits with maturities of one year to less than three years. For deposits of three-five years, the maturity ceiling has been raised to 300 bps from 125 bps.

Senior SBI official said the change was driven by need to bring in stable foreign money. NRIs, especially blue collar and information technology professionals, who are retail customers are expected to respond the most to these rate revisions. SBI’s outstanding NRI deposit base is about $11 billion.