RBI Lifts Cap On FCNR(B), NRE Deposit Rates To Boost Foreign Inflows

The Reserve Bank of India (RBI) has taken a key step aimed at pulling in more foreign currency deposits from non-resident Indians (NRIs). The central bank has temporarily removed interest rate caps on new FCNR(B) deposits with a three-to-five-year tenure and new NRE deposits with a tenure of three years or more, with the relaxation valid until September 30 this year. This gives banks room to offer NRIs more attractive interest rates depending on market conditions, rather than being boxed in by a fixed ceiling.

What Banks Are Currently Offering
Major banks including SBI, HDFC Bank, ICICI Bank, and Axis Bank are currently offering interest rates of up to 6% on FCNR(B) deposits. Yes Bank is offering up to 6.6%, while CSB Bank is offering up to 6.95%.

Why RBI Made This Move
Market watchers see the move as aimed at increasing foreign currency inflows and strengthening dollar liquidity within the banking system.