A number of Indian banks have started increasing interest rates on non-resident Indian (NRI) fixed deposits with long-term maturities.
Federal Bank, Axis Bank and IDBI Bank have joined Karnataka Bank and Dena Bank, who have already raised their rates for non-residence external (NRE) fixed deposits following the liberalisation of the same by the Reserve Bank of India (RBI).
Emirates 24|7 reported earlier that NRIs were set to get higher interest rates on their tax-free NRE fixed deposits with maturities of three years and more.
The Reserve Bank of India (RBI) said on August 14 that it had deregulated the interest rate offered by banks to NRIs.
Banks, until now, were not allowed to pay higher interest rates for NRE deposits (tax-free and fully repatriable) than those for resident ones.
"... It has been decided to give banks the freedom to offer interest rates on such (FCNR, NRE) deposits without any ceiling. The extant ceiling on non-resident ordinary accounts shall continue," RBI said in a notification.
The rupee’s free fall has led to an increase in remittances from the Gulf countries.
The exchange rate is Rs17.21 vs dirham and 63.22 against the US dollar.
Though a few national and cooperative banks continue to offer 9.50 per cent on NRE deposits of 365 to 730 days; rates for long-term deposits (three years to seven years) were ranging between 8 and 8.5 per cent, as banks don't want to lock their liabilities at higher interest rates.
Axis Bank said it increased rates on non-resident external (NRE) fixed deposits for tenors above three years by 50-75 basis points.
For NRE fixed deposits between three and five years, the interest rate has been revised to 9.50 per cent from 8.75 per cent and for tenures between five and 10 years the interest rate has been revised to 9.25 per cent from 8.50 per cent.
IDBI Bank has also increased interest rates on NRE deposits across select buckets.
Rates have been hiked for the tenor of three to seven years by up to 25 basis points to 50 basis points with the peak interest rate being 9.5 per cent. No premature penalty will be levied on retail NRI deposits.
Kerala-based Federal Bank, which has huge NRE deposits has revised its interest rates, offering 9 per cent on maturities of three years and above.
As reported earlier, Karnataka Bank, a Mangalore-based private sector bank, has raised its NRE interest rates across various maturities. For deposits above 3 years to 5 years, the rate now stands at nine per cent.
Emirates 24|7 reported on August 12 that Union Bank of India was luring NRI depositors, assuring doubling of their deposits in 91 months with annual interest rate of 9.25 per cent and an annualised yield of 13.37 per cent.