The State Bank of India (SBI) and ICICI Bank have raised interest rates on Foreign Currency Non-Resident Bank Deposits (FCNR) after the Reserve Bank of India (RBI) last week eased the interest limit until October 31, 2022.
According to the SBI website, the interest rate on deposits in the US dollar category with maturities up to 2 and 3 years is up 85 basis points to 2.85% and 3%. The interest rate on maturities over 3 years was raised by 80 basis points. Thus, a maturity of 3 years to less than 4 years will attract an interest rate of 3.10%; Maturities of 4 years to less than 5 years will yield an interest rate of 3.15%; and the 5-year term will yield an interest rate of 3.25%.
The sterling interest rate was raised by 25 basis points on all maturities. Interest rates on Canadian and Australian dollar deposits were also raised by 50 basis points.
ICICI Bank, India’s second-largest private sector lender, has raised interest on its US dollar deposits, following RBI moves to attract foreign inflows.
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The RBI has taken several measures to attract dollars with the aim of protecting the local currency and retaining the currencies. It exempted banks from maintaining the cash reserve ratio (CRR) and the regulatory liquidity ratio (SLR) for additional NRE (external non-residential) and FCNR (B) (non-resident foreign currency bank) deposits from the fortnight of declaration beginning July 30.
This easing will be available for deposits raised until November 4, 2022. Banks were also allowed to raise new FCNR(B) and NRE deposits without reference to interest rate regulations, effective July 7. This relaxation will be available for the period until October 31, 2022.
In 2021-22, banks had raised $13.9 billion through non-resident deposits, including $10 billion through NR(E)RA deposits and $1.4 billion through FCNR(B) deposits.
In 2022, the Indian rupee depreciated by 6.6% against the dollar.