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| World Home » Current Affairs » | Sun. Oct 12, 2008 |
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RBI hikes interest rate on Non-Resident rupee deposits MIL/Agencies/RBI, Apr 18, 2006. Mumbai, Apr. 18 - The Reserve Bank has announced on Tuesday the increase of the interest rate ceiling on Non-Resident rupee deposits and export credit in foreign currency, while leaving the short- term and long-term rates without any change. Retaining the current interest rate on savings deposits, the RBI, however, favored deregulation of these rates in the long run for product innovation and price discovery. The present rate on the interest on savings is at 3.5 per cent per annum. In the Annual Policy Statement for 2006-07, the RBI increased the interest rate ceiling on Non-Resident (External) (NRE) deposits in rupee for one to three years maturity by 0.25 per cent to one per cent above LIBOR/SWAP rates for US dollar of corresponding maturity with immediate effect. After the recent increase in Foreign Currency Non- Resident (FCNR-B) deposit interest ceiling by 0.25 per cent, the hike in interest rate ceiling of NRE deposits appears to be aimed at ensuring adequate liquidity in the system by attracting more NRI deposits. Also, the interest rate on export credit in foreign currency, currently within ceiling of LIBOR plus 0.75 per cent, has been increased by 0.25 per cent to be LIBOR plus one per cent with immediate effect. Further, the RBI has asked the Indian Banks Association (IBA) to undertake a comprehensive review of interest rate on savings bank deposits and lending rates on small loans up to Rs two lakh according to the bank sources.
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