SBI raises FCNR(B) deposit rates by up to 105 basis points

Days after the Reserve Bank of India (RBI) eased buffer standards and interest rate caps on non-resident foreign currency (bank) [FCNR(B)] deposits, the State Bank of India (SBI) raised rates on such deposits by up to 105 basis points (bps).

The biggest rise was in the one-to-two-year maturity portion of the US dollar category, which will now yield 2.85% pa. Dollar deposits maturing in two years to less than three years will now yield 3%, 85 bps more than before, while those maturing in three years to less than four years will yield 80 bps more at 3 .1%. The four-to-five-year maturity bucket will earn 80 basis points higher at 3.15% and five-year dollar deposits will earn 3.25%, 80 basis points higher than before.

Rates on one-year deposits denominated in sterling were raised by 25 basis points to 2%, in Canadian dollars by 50 basis points to 2.3%, in Australian dollars by 50 basis points to 1.2 %. Interest rates on all deposits denominated in euros and Japanese yen remained unchanged.

In order to slow down the depreciation of the rupee, the RBI last week announced a series of measures aimed at attracting stronger currency inflows. Among the measures was an exemption for a limited period of additional deposits in FCNR (B) and Non-Resident (External) Rupee (NRE) with a reference date of July 1, 2022 from the maintenance of the cash reserve ratio and the statutory liquidity ratio. This easing will be available for deposits mobilized until November 4, 2022.

The interest rate cap on these deposits has been removed with effect from July 7 to October 31, 2022. Previously, interest rates on FCNR(B) deposits were subject to Alternative Reference Rate (ARR) caps overnight for currency/swap plus 250 bps for deposits with a maturity between one year and less than three years. For deposits maturing in three to five years, rates were capped at the overnight ARR plus 350 basis points.

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