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RBI/2005-06/298
DBOD. No. Dir.BC. 62/13.03.00/ 2005-06
February 8, 2006
All Commercial Banks
(excluding RRBs)
Dear Sir,
Interest Rates on Non-Resident Deposits
Please refer to our Master Circulars DBOD. No.
Dir. BC. 5 & 6 / 13.03.00/ 2005-06 dated July 1, 2005 on Interest Rates
on Domestic and NRI Deposits.
2. In terms of our extant guidelines, interest
rates on NRE deposits of one to three years' maturity should not exceed the
LIBOR/ SWAP rates as on the last working day of the previous month for US dollar
of corresponding maturity plus 75 basis points. Similarly, rates of interest
on FCNR(B) deposits of one year and above should be within the ceiling rate
of LIBOR/ SWAP rates for the respective currency/ corresponding maturities minus
25 basis points. The maturity period of NRE deposits varies from 1 to 3 years
and that of FCNR(B) deposits from 1 to 5 years. Banks have been allowed to accept
FCNR(B) deposits denominated in US dollar, Pound Sterling, EURO, Canadian dollar,
Australian dollar and Japanese Yen. At present, LIBOR/ SWAP rates as on the
last working day of the month form the base for fixing ceiling rates for interest
on NRE/ FCNR(B) deposits that would be offered effective from the following
month.
3. Some of the banks have represented that in
the absence of any directions on how to set rates based on LIBOR/SWAP rates,
banks are using different
methods, sources and cut-off timings to decide
the interest rates on NRE/ FCNR(B) deposits, resulting in significant variation
in interest rates offered to non-resident depositors. The matter was examined
and it has been decided that in order to ensure uniformity and transparency
in interest rates on NRE/ FCNR(B) deposit, FEDAI would quote/ display the LIBOR/
SWAP rates which will be used by banks in arriving at the interest rates on
NRI deposits. FEDAI will publish the deposit rates for five maturities in six
currencies on the last working day of each month using a web page that can be
accessed by all the subscribers to the Reuters screen. The first such rates
would be indicated by FEDAI for the last working day of February 2006. FEDAI
will shortly inform the relevant details in this regard.
4. All other terms and conditions applicable
to the NRI deposits remain unchanged.
Yours faithfully,
(P. Vijaya Bhasker)
Chief General Manager
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