2 weeks ago
Banks raise FCNR(B) rates as RBI shortens forex swap deadline
Indian banks want people living outside India to deposit their dollars with them.
To attract these deposits, some banks have increased the interest they pay.
The Reserve Bank of India created a special program to bring more dollars into India.
The program was originally supposed to run until September 30.
The RBI moved the end date forward to August 31 because many dollars had already come in.
Axis Bank and Federal Bank raised some of their deposit rates to 6.40 percent.
HDFC Bank and ICICI Bank displayed countdown clocks for customers.
By the middle of August, the program had brought in $52.3 billion in foreign exchange.
The Reserve Bank of India shortened its FCNR(B) dollar-rupee swap window deadline to August 31 from September 30.
The RBI said the deadline was reduced because the facility received an encouraging response and enough foreign exchange had flowed into India.
Axis Bank raised rates on FCNR(B) deposits above $1 million to 6.40% for three-to-five-year terms.
Federal Bank increased some three-to-five-year US dollar FCNR(B) deposit rates to 6.40%.
The facility attracted $52.3 billion in foreign exchange inflows by mid-August, compared with nearly $41 billion by the end of July.
- Who
- The Reserve Bank of India, Indian banks, and non-resident Indian depositors.
- What
- Banks increased interest rates and intensified efforts to attract FCNR(B) deposits after the RBI shortened its dollar-rupee swap facility deadline.
- Where
- India, with banks seeking foreign-exchange inflows from non-resident Indians.
- When
- The revised deadline is August 31; rate changes at Axis Bank and Federal Bank took effect August 17. The facility had been announced June 8.
- Why
- The RBI introduced the facility to attract dollars amid a weakening rupee and shortened it after what it described as an encouraging response.
Key facts
- Revised RBI deadline
- August 31, shortened from September 30
- Foreign-exchange inflows
- $52.3 billion by the middle of August
- Axis Bank rate
- 6.40% for FCNR(B) deposits above $1 million with three-to-five-year tenors
- Federal Bank rate
- 6.40% for US dollar deposits of $500,000 to less than $3 million with three-to-five-year tenors
- Participating banks
- The facility covered FCNR(B) deposits, external commercial borrowings, and overseas foreign-currency borrowings
- Website promotion
- HDFC Bank and ICICI Bank added countdown timers showing time remaining for the attractive FCNR(B) rates
Sources
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