A clutch of banks, including Punjab National Bank (PNB), Bandhan Bank, South Indian Bank and Equitas Small Finance Bank, have raised interest rates on Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, offering returns ranging from 6.5 per cent to 7.13 per cent.
PNB has enhanced interest rates on its [FCNR(B)] deposits, offering up to 6.6 per cent per annum on deposits of $1 million and above with maturities of up to five years.
For deposits below $1 million, the bank is offering interest rates of up to 6.5 per cent on US dollar- and pound sterling-denominated FCNR(B) deposits. Euro-denominated deposits will earn up to 4.95 per cent, while Canadian dollar and Australian dollar deposits will fetch up to 4.9 per cent and 5.5 per cent, respectively.
For deposits of $1 million and above, interest rates rise to 6.6 per cent for US dollar and pound sterling deposits, 5.05 per cent for euro deposits, 5 per cent for Canadian dollar deposits and 5.6 per cent for Australian dollar deposits.
Bandhan Bank on Friday raised interest rates on Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, offering 7.1 per cent on US dollar-denominated deposits of $1 million and above for tenures of three to five years. The bank has also increased the rate on deposits of up to $1 million to 7 per cent.
Similarly, South Indian Bank has revised the interest rate on its [FCNR(B)] USD Deposits to 6.50 per cent per annum for deposits with a maturity period of three to five years. And Equitas Small Finance Bank has revised its FCNR (B) deposit rates, offering NRIs returns of a US Dollar–Rupee Forex Swap Facility for banks on fresh FCNR (B) deposits mobilized for a minimum tenor of three years and up to 5 years.
This regulatory measure aims to encourage foreign currency inflows into the banking system.
This regulatory measure is aimed at encouraging foreign currency inflows into the banking system. It is expected to help NRI customers secure stable and competitive returns over a longer tenure, while also mitigating exposure to potential exchange rate fluctuations, particularly in the event of rupee depreciation.
Interestingly, the upward revision in rates by these comes after RBI removed the interest rate ceiling on fresh deposits with maturities of three to five years.
Banking industry sources said the central bank’s decision to temporarily withdraw the interest rate ceiling on fresh FCNR(B) deposits in the three-to-five-year maturity bucket until September 30, 2026, came after requests from smaller banks.
Industry sources have said that banks will likely offer upto 7.10 per cent on these deposits.
Before the relaxation, FCNR(B) deposits with maturities of three to five years were subject to a ceiling of the overnight alternative reference rate for the respective currency or swap rate plus 350 basis points (bps).
Most of the banks have already increased FCNR(B) deposit rates in recent months to attract overseas deposits. While some headroom is there for increasing the rate, but bankers also say that rates are already very high.
Among major lenders, State Bank of India (SBI), HDFC Bank, ICICI Bank, and Axis Bank currently offer rates of up to 6 per cent on FCNR(B) deposits with maturities ranging from three to five years.
Interestingly, state-owned Bank of Baroda (BoB) has raised interest rates on FCNR(B) deposits further by up to 50 bps on Tuesday, offering a peak rate of 6.25 per cent on five-year deposits.
Some of the smaller private sector banks are offering a higher rate than their larger peers. Yes Bank offers up to 6.6 per cent on five-year FCNR(B) deposits, and AU Small Finance Bank is dangling a peak rate of 7.1 per cent on such deposits. CSB Bank increased rates on deposits with maturities of three years to less than four years by 290 bps to 6.95 per cent.
