Commenting on the reduction of the ceilings of the deposit rates, Manasije Mishra, senior vice-president and head-NRI services, HSBC said, "With the cut in the interest rate ceiling NRE and FCNR deposits will become a less attractive investment option now. Recently, we have seen other avenues like online saving products abroad becoming more attractive as compared to deposits as they provide liquidity to the customer. Hence we can expect fall in the deposits in coming days." Currently, most banks are offering interest rates to the regulatory maximum levels which amounts to Libor plus 100 basis point in case of NRE deposits while on the FCNR(B) front bank are offering interest rate at Libor.

The RBI has also capped banks lending against the NRE and FCNR deposit to the NRI customer. Expressing a concern on higher advance growth the RBI said, "Pending a review of the extent of large advances to high net worth individuals, banks are being prohibited from granting fresh loans in excess of Rs 20 lakh against the NR(E)RA and FCNR(B) deposits, either to depositors or to third parties." Further, RBI has advised banks not to undertake artificial slicing of the loan amount to circumvent the ceiling.

According to analysts, this move by the country’s central bank can been viewed as a precautionary measure to curb the advance given to NRI customers.

Many NRI customers are seen using the loans against FCNR deposits and NRE deposits to invest in the real estate and stock markets. Thus by using this route customers can hedge their rupee risk. Moreover, it has been seen that the ticket size for these advances have been in excess of Rs 20 lakh in most of the cases.