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05 March 2024

NRI alert: End of lucrative interest rates on India deposits

By Parag Deulgaonkar

A mere four days remain for Non-Resident Indians (NRIs) to book fixed deposits on a higher interest rate.

From March 1, interest rates on non-resident external (NRE) fixed deposits will have to be similar to domestic rupee deposits, according to a Reserve Bank of India (RBI) directive.

“With effect from March 1, the interest rate ceiling will revert to the position prior to August 14, 2013, which means that interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits,” RBI said last month.

It was in August 2013, that the apex bank removed the cap on banks limiting interest rates on NRI deposits in a bid to increase foreign exchange reserves and stem the fall in value of rupee against the US dollar.

Before the cap removal, NRE rates were between 2 and 5 per cent per annum.

On Sunday, Kotak Mahindra Bank put an advert in a local newspaper, enticing NRIs by offering 9.75 per cent interest rate per annum on NRE deposits, stating an effective yield of 11.17 per cent for three years.

“It’s a limited period offer. It’s the best rate now in the market for NRE deposits,” a bank executive told Emirates 24|7.

Ramesh Kumar, a PR executive said: “I wasn’t aware of the RBI directive. I will remit money in the next two or three days so I can book a fixed deposit at a good interest rate before such offers vanish.”

Emirates 24|7 reported earlier that HDFC was offering guaranteed returns of 13 to 14 per cent on fixed deposits.

According to bankers, the NRE deposit rates will continue to remain in the range of five to eight per cent for tenures of one year to five years.

RBI statistics reveal that NRE deposits witnessed net inflows in December with outstanding NRE deposits standing at $49.61 billion, compared to$49.10 billion in November.

Non-Resident Ordinary deposits remained flat at $8.57 billion in December compared to last month.

But the closure of the swap facility for FCNR-B deposits in November, the flow of money into NRI deposits fell to mere $1.28 billion in December 2013.

In November, the deposits were to the tune of $13.71 billion.