The Reserve Bank of India has issued fresh guidelines in connection with interest rates on non-resident (external) rupee (NRE) term deposits and FCNR (B) deposits. As per the guidelines, the interest rates on fresh NRE term deposits for one to three years maturity should not exceed the libor/swap rates plus 100 basis points, as on the last working day of the previous month, for US dollar of corresponding maturities (as against libor/swap rates plus 50 basis points effective from the close of business on September 16.
The interest rates as determined above for three year deposits will also be applicable in case the maturity period exceeds three years. The changes in interest rates will also apply to NRE deposits renewed after their present maturity period.
In the case of FCNR (B) deposits of all maturities, interest shall be paid within the ceiling rate of libor/swap rates plus 25 basis points for the respective currency/corresponding maturities from earlier existing minus 25 basis points. On floating rate deposits, interest will be paid within the ceiling of SWAP rates for the respective currency / maturity plus 25 basis points. For floating rate deposits, the interest rest period will be six months, said the RBI statement on Thursday.
Meanwhile, country?s largest lender, State Bank of India (SBI) and second biggest state lender, Punjab National Bank, have hiked their interest rates on FCNR (B) deposits in US$, EURO, GBP, CAN$, AUD and JPY as also RFC deposits in US$ since 17 October and 16 October, 2008 respectively. While SBI has hiked the interest rates These rates will be applicable for the rest of the month of October 2008. The rate of interest on USD deposits has been hiked to 4.21% for maturity of 1 year to less than 2 years. Similarly, the interest rates for maturity of 2 years but less than 3 years will be 3.52%.