Several banks, including HDFC Bank, State Bank of India and ICICI Bank have revised their FCNR deposits after the Reserve Bank of India (RBI) last week temporarily allowed the lenders to accept new FCNR(B) NRE deposits from non-resident Indians (NRIs) without interest rate limits. The measure was taken by the RBI to attract foreign funds and bolster the rupee.
Last week, the RBI decided 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. This relaxation will be available for the period up to October 31.
Without these relaxations, 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.
What Are FCNR Deposits?
An FCNR deposit account is a fixed deposit account for foreign currency that allows NRIs to earn tax-free interest on their investment. FCNR(B) is held in foreign currency and is an investment option for NRI/ persons of Indian origin/ overseas citizens of India who are looking to retain their money in foreign currency for good returns. It can help in avoiding foreign currency exchange risk, ensuring high and guaranteed returns.
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Latest FCNR rates of SBI, HDFC Bank, and ICICI Banks:
According to State Bank of India’s website, interest rates for FCNR deposits are in the range of 2.85 per cent to 3.25 per cent for the dollar currency. These are the revised rates effective July 10. On the one-year FCNR deposit, simple interest is applicable; while for deposits for above one year, interest is compounded on a half-yearly basis.
According to HDFC Bank’s website, interest rates on FCNR deposits are in the range of two per cent to 3.35 per cent for the dollar currency. The bank has revised FCNR rates with effect from July 9, 2022. According to the HDFC Bank website, “Effective July 1, 2021, FCNR deposit for GBP, Euro & JPY currencies will be offered only for 1-Year tenure. Existing FCNR deposits booked under GBP, EURO & JPY currencies for the tenor 1 year 1 day to 5 years and which are due for auto-renewal will be auto renewed for 1 year tenor by default.”
ICICI Bank has also revised its interest rates on FNCR for currencies like GBP, USD, CAD, SGD, AUD, and HKD. The new rates have come into effect from July 11, 2022. It now offers a 2.5 per cent rate on FCNR deposits below $350,000 on tenures above 12 months to 60 months. Above $350,000 deposits, the rate is 3.35 per cent on 12 months to 24 months tenure, while remaining tenures have 2.50 per cent.
