Interest rate ceiling on NRE deposits
hiked
By: PTI
New Delhi, April 18, 2006
PTI
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The Reserve Bank of India today increased the interest
rate ceiling on Non-Resident rupee deposits and export
credit in foreign currency, while keeping the short-
term and long-term rates untouched.
Retaining the current interest rate on savings deposits,
the central bank, however, favoured deregulation of
these rates in the long run for product innovation
and price discovery.
Currently, the interest rate on savings is at 3.5
per cent per annum.
In the Annual Policy Statement for 2006-07, the RBI
increased the interest rate ceiling on Non-Resident
External (NRE) deposits in rupee for one to three
years maturity by 0.25 per cent to one per cent above
LIBOR/SWAP rates for US dollar of corresponding maturity
with immediate effect.
After the recent increase in Foreign Currency Non-
Resident (FCNR-B) deposit interest ceiling by 0.25
per cent, the hike in interest rate ceiling of NRE
deposits appears to be aimed at ensuring adequate
liquidity in the system by attracting more NRI deposits.
Also, the interest rate on export credit in foreign
currency, currently within ceiling of LIBOR plus 0.75
per cent, has been increased by 0.25 per cent to be
LIBOR plus one per cent with immediate effect.
Further, the apex bank has asked the Indian Banks'
Association to undertake a comprehensive review of
interest rate on savings bank deposits and lending
rates on small loans up to Rs 2 lakh.
