Federal Bank on Thursday announced higher rates on non-resident external (NRE) deposits for a limited period, following a 75-bps rate hike by the US Federal Reserve and the RBI removal of interest rate caps on such deposits.
The special rates – 80 bps above existing rates – will be available between July 28 and August 4. They will apply to term deposits opened for 15-month period. Deposits under Rs 2 crore will earn 6.4% and those with amounts of Rs 2 crore and above will earn 6.65%. “It is an exciting opportunity for non-residents to invest their funds as the interest earned is exempt from income tax and loan can be availed up to 90% of the deposit amount,” the bank said.
The Aluva, Kerala-headquartered lender is the second one after HDFC Bank to open a special window for attracting deposits from non-resident Indians (NRIs) amid a strong downward trend in the rupee. Earlier, HDFC Bank had launched a similar offer for a two-day period, which ended on Thursday.
The RBI’s decision to temporarily remove interest rate caps on incremental foreign currency non-resident (bank) [FCNR(B)] and rupee NRE deposits, and exempt them from the maintenance of cash reserve ratio (CRR) and statutory liquidity ratio (SLR) was aimed at helping banks attract more money from their NRI clients. The relaxation will be available for deposits mobilised up to November 4.Soon after the measures were announced on July 6, large banks had hiked their FCNR(B) deposit rates by up to 105 bps.