reserve ratio and statutory liquidity ratio requirements. The central bank also removed the cap on the interest rate on deposits above 3-years. In response, a number of banks including Axis Bank, Federal Bank and IDBI Bank had all raised their interest rates in foreign currency non-resident (FCNR) and non-resident external (NRE) rupee deposits by 50-100 basis points in tenures above three years.
While a bulk of the deposits across the industry are currently in the one-year bucket, an increase in rates on longer tenure deposits is likely to draw in funds over the next few months, say bankers.
"Over time the longer term deposits will gain more share," said Surendra of Federal Bank.
As per RBI data, as on June 30, the outstanding NRI deposits stood at $71.07 billion for the banking system. Of this, NRE deposits were a little over $47 billion, while FCNR deposits stood at close to $15 billion. During the previous fiscal FY13, NRI deposits rose 21.2% year-on-year to $70.8 billion.