Similarly, it raised the ceiling by 75 bps on non-resident (external) rupee accounts (NRE) to Libor plus 175 bps.
Since October 2008, the interest rate ceilings on FCNR (B) and NRE term deposits were increased by 100 basis points each.
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A Bank of Baroda (BoB) official said the system is facing a shortage of dollar resources. It is possible that NRIs may move funds to India expecting better returns when the interest rates in developed countries are being slashed. However, it was too early to see an impact.
ICICI Bank, India's second largest banking entity, revised the interest rates on its NRE fixed deposits and FCNR(B) deposits with effect from November 18, 2008.
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By Mr Chitranjan, Section Finance & Investing
Posted on Mon Nov 17, 2008 at 10:59:36 PM EST
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State Bank of India, the country's largest lender hiked interest rates on its foreign currency and rupee deposits by non-residents with effect from on Monday. For NRE (rupee) deposits for a duration of one year to less than two years, the rate has been increased to 4.92 per cent from the earlier 4.17 per cent, a release issued here said. For FCNR (B) dollar-denominated deposits, the interest rate has been hiked to 4.17 per cent from 3.42 per cent and for two years and above but less than three years, the new rate is 3.66 per cent from the earlier 2.91 per cent.
According to RBI data, in the April-September 2008 period, banks saw a net outflow of $720 million from FCNR (B) deposits. The outstanding FCNR (B) deposits at the end of September stood at $13.44 billion. The NRE deposits saw an inflow of $780 million in six months, taking the deposit base to $23.75 billion. The size of NRI deposits at the end of September was $40.34 billion.
Other banks, which have revised the rates include Punjab National Bank while HDFC Bank is expected to revise its rates tomorrow.
Source: Business-standard 18/Nov/2008
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