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Banks like SBI, HDFC Bank, ICICI Bank, and IDFC First Bank have raised their foreign currency non-resident deposits (FCNR) in response to RBI's move to enhance forex inflows while ensuring overall macroeconomic and financial stability. RBI plans to tame the depreciation of the Indian rupee through these measures. Banks revised their FCNR rates right after RBI relaxed the  norms and permitted them to raise fresh FCNR(B) and NRE deposits without reference to the extant regulations on interest rates with effect from July 7, 2022.

From July 10, SBI revised its FCNR on various currencies like USD, GBP, EURO, CAD, AUD, and JPY. The interest rate ranges from 2.85% to 3.25% in USD deposits. For 1 year’s FCNR (B) deposit, simple interest is applicable, while for FCNR (B) deposit above 1 year, interest is compounded at half-yearly frequency.

SBI increased one-year FCNR USD deposits to 2.85% from 1.8% earlier, while the rate has been hiked to 3.10% for 3-4 years tenure and 3.25% for 5-years tenure compared to the previous 2.30% and 2.45% respectively. The rate is 3% on 2 years to less than 3 years tenure and 3.15% on 4 years to less than 5 years tenure.

Meanwhile, ICICI Bank has revised its interest rates on FNCR for currencies like USD, GBP, CAD, AUD, SGD, and HKD. The new rates have come into effect from July 11, 2022.

ICICI offers a 2.5% rate on FCNR deposits below USD 350,000 on tenures above 12 months to 60 months. Above USD 350,000 deposits, the rate is 3.35% on 12 months to 24 months tenure, while remaining tenures have 2.50%.

From July 9, HDFC Bank is offering 2% on FNCR deposits from USD 1 million to USD 20 million on 1-year tenure. The rate is the same for 1 year 1 day to less than 2 years tenure.

IDFC First Bank raised interest rates on FCNR deposits above 1 million. In USD deposits, the bank is providing a 3.5% rate on maturity period from 1 year to less than 5 years. While the rate is 2.5% on 5 years tenure. No interest will be paid if the FCNR Deposit is prematurely withdrawn within 1 year of deposit creation. The interest on FCNR deposits is compounded at intervals of 180 days each and thereafter for the remaining actual number of days. The principal is increased to include the interest earned during the previous 180 days.

On July 6, RBI announced to temporarily permit banks to raise fresh FCNR(B) and NRE deposits without reference to the extant regulations on interest rates, with effect from July 7, 2022. This relaxation will be available for the period up to October 31, 2022.

Generally, interest rates on Foreign Currency Non-Resident Bank [FCNR(B)] deposits are subject to ceilings of Overnight Alternative Reference Rate (ARR) for the respective currency/swap plus 250 basis points for deposits of 1 year to less than 3 years maturity and overnight ARR plus 350 basis points for deposits of 3 years and above and up to 5 years maturity. In the case of NRE deposits, as per extant instructions, interest rates shall not be higher than those offered by the banks on comparable domestic rupee term deposits.

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