State Bank of India (SBI) and ICICI Bank have hiked interest rates on foreign currency non-resident (FCNR) bank deposits after the Reserve Bank of India (RBI) last week eased the interest cap till October 31, 2022.
According to SBI’s website, the interest rate on US dollar category deposits with maturities up to 2 and 3 years are up by 85 basis points to 2.85 per cent and 3 per cent. Interest rate on maturities above 3 years has been raised by 80 basis points. Accordingly, 3-year to less than 4-year maturity will attract an interest rate of 3.10 per cent; 4-years to less than 5-years maturity will fetch an interest rate of 3.15 per cent; and 5-year maturity will fetch an interest rate of 3.25 per cent.
The interest rate on British Pound Sterling has been raised by 25 bps across maturities. Interest rates on Canadian and Australian dollar deposits were increased by 50 basis points as well.
ICICI Bank, India’s second largest private sector lender, has raised interest on its US dollar deposits, following the RBI’s measures to attract foreign flows.
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The RBI last took several steps to attract dollars in a bid to protect the local currency and conserve foreign exchange. It exempted banks from maintaining the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) for incremental NRE (non-residential external) and FCNR (B) (foreign currency non-resident-bank) deposits with effect from the reporting fortnight beginning July 30.
This relaxation will be available for deposits mobilised up to November 4, 2022. Banks also have been allowed to raise fresh FCNR (B) and NRE deposits without reference to the regulations on interest rates, with effect from July 7. This relaxation will be available for the period up to October 31, 2022.
In 2021-22, banks had raised $13.9 billion by non-resident deposits, of which $ 10 billion was by NR(E)RA deposits and $1.4 by FCNR (B) deposits.
In 2022, India’s rupee has depreciated 6.6 per cent versus the dollar.