SBI, Union Bk revise NRI deposit rates

State-run State Bank of India and Union Bank of India have raised the interest rates on foreign currency non-resident (FCNR) and non-residential external (NRE) deposits, effective March 1.

The banks offer FCNR deposits in six currencies — US dollar, euro, pound sterling, Canadian dollar, Australian dollar, and Japanese yen. In the FCNR deposit category, SBI has raised rates by 12-21 basis points on US dollar deposits across various maturities. The new rate for one and less than two-year category is 3.12 per cent (2.98 per cent).

Five-year FCNR (B) deposits carry higher rate across various maturities at 3.66 per cent as against 3.45 per cent earlier. Data from the central bank indicates that the outflow from FCNR deposits in April- December 2008 has increased to $1,230 million from $371 million in the year-ago period.

The outstanding amount in FCNR 9B accounts stood at $12,937 million at the end of December 2008. The rates for NRE deposits have also been raised by 12-14 basis points across different maturities. The one year to less than two years maturity bucket will have a new rate of 3.97 per cent as against 3.73 per cent.

The three to five year category will carry a rate of 3.82 per cent, up from 3.68 per cent.

Overseas Indians have increased amounts in NRE deposits in the nine months ended December 2008 compared to same period the year before. Inflows into NRE deposits rose to $1,286 million during the period compared to $960 million in April-December 2007. The outstanding deposits tally was $23,218 million.

In the case of non-resident ordinary rupee account (NRO), inflows have grown almost five-fold in nine months ended December 2008 to $1,964 million from $400 million.

Explaining the rationale for the sharp rise in NRO deposits, an executive from SBI said, “The remittances have grown. There is shift in preference of NRIs. People prefer to keep deposits in rupee as they wish to minimise exposure to volatility in international markets.” The outstanding deposits stood at $4,135 million.