Post RBI easing norms, banks hike foreign currency deposit rates

The RBI had last week temporarily allowed banks to raise fresh FCNR(B) and NRE deposits from NRIs without reference to the current regulations on interest rates, with effect from July 7, 2022.

SBI has revised the FCNR rates on US dollar in the range of 2.85-3.25 per cent per annum on various tenure US dollar deposits with effect from July 10, 2022.

Banks have started hiking interest rates on foreign currency deposits following the Reserve Bank’s decision to relax norms to shore up forex inflows. SBI, ICICI Bank, HDFC Bank and IDFC First Bank have raised interest rates on foreign currency non-resident (FCNR) deposits.

The RBI had last week temporarily allowed banks to raise fresh FCNR(B) and NRE deposits from non-resident Indians (NRIs) without reference to the current regulations on interest rates, with effect from July 7, 2022. This relaxation will be available for the period up to October 31, 2022.

SBI has revised the FCNR rates on US dollar in the range of 2.85-3.25 per cent per annum on various tenure US dollar deposits with effect from July 10, 2022. It has hiked the rate on one-year tenure FCNR USD deposits to 2.85 from 1.80 per cent earlier. For deposits of 3-4 years and 5 years, it has been hiked to 3.10 per cent and 3.25 per cent, respectively. The previous rates were 2.30 per cent and 2.45 per cent.

ICICI Bank has revised upwards FCNR by 0.15 per cent on deposits of higher than and equal to USD 350,000 for 12-24 months tenure to 3.50 per cent. The new rate has come into effect from July 13, 2022.

HDFC Bank revised FCNR on USD deposits for tenure of 1 year to less than 2 years at 3.35 per cent with effect from July 9, 2022.

Equitas Small Finance Bank also announced the revision of interest rates for fixed and recurring deposits of non-resident external (NRE) account with effect from July 13, 2022. It has increased NRE interest rate up to 7.40 per cent for NRE FD for 888 days and up to 7.30 per cent for NRE RD for 36 months.

IDFC First Bank has revised the rates on FCNR deposits above $ 1 million with effect from July 13, 2022. For US dollar deposits, the lender offers an interest rate of 3.50 per cent in deposits ranging from 1 year to less than 5 years. For 5-year tenure USD deposits, it offers a 2.50 per cent interest rate.

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Besides relaxing norms on FCNR deposits, the RBI raised overseas borrowing limits for companies and liberalised norms for foreign investments in government bonds to boost foreign exchange inflow.

Total NRI deposits had declined to $ 139.02 billion in FY22 from $ 141.89 billion in the previous year. NRE deposits account for a major chunk of NRI deposits with an outstanding at $ 100.80 billion, down from $ 102.57 billion a year ago, amid expectations of a rate hike by global central banks. FCNR(B) deposits of banks were at $ 16.91 billion as of March 2022.

Banks will be able to offer higher returns to NRIs on their deposits in the wake of the RBI relaxation. “The removal of CRR, SLR and interest rate capping norms for incremental NRI deposits in FCNR-B and NRE term deposits will help in reduction of cost of funds and allow banks to offer higher yields to customers,” said a bank official.