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In order to stem rupee's fall and boost foreign currency inflow, RBI had deregulated interest rates on NRI deposits and urged banks to hike rates on such deposits sharply even as they were lowering rates for domestic deposits.
Indian currency had slipped to all-time low of 57.32 to the dollar on June 14. However, even as currency has gained around 4.6 per cent from its all-time low, NRI deposits have continued to increase amid high interest rates in the Indian economy.
In November 2011, RBI had raised maximum interest rates on NRE accounts for one-year-plus to Libor plus 275 bps while, on FCNR deposits to 200 bps above the Libor for one-three-year deposits and 300 bps for deposits in the three-five year category.