NRE, FCNR deposits rates rise as banks woo NRIs

Updated: Saturday, August 24, 2013, 12:17 [IST]

Banks are beginning to woo NRIs with higher returns on NRE and FCNR deposits after domestic liquidity conditions were tightened by the RBI. This month the RBI allowed banks a hike in FCNR (B) rates to LIBOR plus 4 per cent for NRIs. LIBOR is the London Interbank Offer Rate. Read all about FCNRB deposits here

FCNR (B) deposits are deposits which can be kept in a host of foreign currencies including US Dollar deposits, euro and Sterling Pound deposits. Like NRE deposits only NRIs can invest in FCNR (B) deposits, which are also known as Foreign Currency Non Resident (Bank) Scheme.

Syndicate Bank has made an upward revision of the rate of interest on FCNR (B) for US Dollar deposits of 3 to 5 years by 1%, effective from August 22.

The rate of interest on FCNR (B) deposits in US Dollar of three years to five years has been increased by 1%. The revised interest for three years is 4.78%, four years is 5.17% and five years is 5.56%.

DCB Bank has also announced an increase NRE Fixed Deposit interest rates . A fixed deposit for made for 3 years at the bank yields 11.83% per annum.

Punjab National Bank had hiked rates on FCNR(B) deposits earlier this month. It was followed by IDBI Bank which upped interest rates on FCNR (B) deposits for the tenor of three years and above by 100 basis points (bps) across all nine currencies.

In respect of NRE deposits, IDBI Bank has hiked rates for the tenor of more than three years up to seven years by up to 25 bps to 50 bps. To read on the difference between NRE and NRO deposits click here

It's never been this good for NRIs. While earlier NRE deposits were linked to LIBOR, it was freed last year to attract dollar inflows into the country. This along with a hike in FCNR (B) rates to LIBOR plus 4 per cent is certainly good news for NRIs. Not to forget the falling rupee against the dollar which already has helped NRIs make windfall gains as they will now get more of the Indian currency, each time they exchange currency in which they earn money.

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