Mumbai– Indian banks are offering higher interest rates on foreign currency deposits as they intensify efforts to attract funds from non-resident Indians ahead of an earlier deadline for a Reserve Bank of India dollar-rupee swap facility.
The RBI recently moved the deadline for the facility to Aug. 31 from Sept. 30 after what it described as an encouraging response that brought substantial foreign exchange into the country.
The central bank introduced the swap window in June to increase dollar inflows amid pressure on the rupee. The shortened deadline has prompted banks to step up competition for Foreign Currency Non-Resident, or FCNR(B), deposits.
Axis Bank raised its rate on FCNR(B) deposits of more than $1 million to 6.40 percent for terms of three to five years, effective Aug. 17. The bank had previously offered 6.25 percent, up from 6 percent when the program began. It is offering 6.25 percent on deposits of less than $1 million.
Federal Bank also increased its FCNR(B) rate to 6.40 percent from 6.25 percent, effective Aug. 17. The bank is offering the 6.40 percent rate on U.S. dollar deposits ranging from $500,000 to less than $3 million for terms of three to five years.
For deposits of $3 million or more, Federal Bank is offering 6.25 percent for terms of three to five years and 6.40 percent for four- to five-year deposits.
HDFC Bank and ICICI Bank have also stepped up efforts to attract NRI funds, placing countdown timers on their websites showing customers how much time remains to take advantage of higher FCNR(B) rates.
The RBI’s forex swap facility had attracted $52.3 billion in foreign exchange inflows by mid-August.
Introduced on June 8, the special U.S. dollar-rupee swap facility covers FCNR(B) deposits, external commercial borrowings and overseas foreign currency borrowings. The measure was designed to attract overseas funds and help banks and state-owned companies access cheaper dollar financing.
The programs had brought in nearly $41 billion by the end of July. (Source: IANS)
