Mumbai, Aug 18 — Indian banks have stepped up their efforts to attract FCNR(B) deposits by offering higher interest rates after the Reserve Bank of India (RBI) suddenly cut short the deadline for its dollar-rupee swap window to August 31, from September 30.
The swap facility, announced in June to boost the inflow of dollars amid a weakening rupee, was originally available until the end of September, but the RBI abruptly shortened this by a month due to the “encouraging response” to the facility, which resulted in the required amount of foreign exchange flowing into the country
Private sector Axis Bank, for instance, has hiked its interest rate on FCNR(B) deposits of more than $1 million to 6.40 per cent for a three-to-five-year tenor, with effect from August 17. The bank was earlier offering 6.25 per cent on these deposits, up from 6 per cent when the scheme was operationalised. It is now offering 6.25 per cent on FCNR(B) deposits of less than $1 million.
Federal Bank has also raised the interest rate on FCNR(B) deposits to 6.40 per cent from 6.25 per cent, effective August 17. The bank is offering 6.40 per cent on US dollar FCNR(B) deposits of $500,000 to less than $3 million for tenors of three to five years. For deposits of $3 million and above, it offers 6.25 per cent for three to five years, and 6.40 per cent for four to five years.
HDFC Bank and ICICI Bank have put countdown timers on their websites showing NRI customers the days, hours, minutes, and seconds remaining to take advantage of attractive interest rates on FCNR(B) deposits, as part of the aggressive drive for forex inflows.
The RBI’s forex swap facility for FCNR(B) deposits has attracted $52.3 billion in foreign exchange inflows until the middle of August. The RBI had introduced the special USD-INR forex swap facility on June 8, covering FCNR(B) deposits, external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) to attract non-resident Indian deposits and encourage banks and state-run companies to tap cheaper dollar funding. The schemes had attracted nearly $41 billion in inflows by the end of July.