In India, banks are raising interest rates on deposits and loans due to the monetary policy tightening, in addition, lenders are increasing interest rates for foreign depositors. Yes Bank, a private sector lender, has now increased interest rates on its fixed deposits for NRE accounts by 50 to 75 basis points.
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This action comes after the RBI in July, with effect from July 7, temporarily permitted banks to raise new FCNR(B) and NRE deposits without taking into account the current interest rate regulations. This relaxation will be offered from now through October 31.
NRE Fixed Deposit:
The NRE Fixed Deposit rate has been increased to 7.01% per annum for the tenure of 12 months to less than 18 months. The rate for tenures longer than 18 months have also been hiked to 7.25% annually. These revised rates are applicable for deposits less than Rs 5 crore.
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FCNR deposit:
“The Bank is also offering a peak rate of 4.25% p.a. on USD FCNR deposits for the tenure of 24 months to less than 36 months,” stated the press release.
Prashant Kumar, MD & CEO, YES BANK said, “The recent relaxation announced by the RBI to attract forex inflows has allowed us a window to hike interest rates on our NRE and FCNR Fixed Deposit offerings, thus extending the benefit to our customers. This initiative is in alignment to the various strides the Bank has taken in the recent past to benefit customers.”
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Without these relaxations, interest rates on Foreign Currency Non-Resident Bank [FCNR(B)] deposits are capped at overnight alternative reference rate (ARR) for the relevant currency/swap plus 250 basis points for deposits with maturities of 1 year to less than 3 years, and overnight ARR plus 350 basis points for deposits with maturities of 3 years and higher and up to 5 years.
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For NRIs, people of Indian heritage, and Indian citizens living abroad who want to keep their money in foreign currency and earn decent returns, FCNR(B) is an investment alternative. It can aid in reducing the danger of currency exchange while guaranteeing great returns.
