Interest rate ceilings on FCNR (B) deposits have been increased by RBI.
This will enable Non-Resident Indians (NRIs) to earn more on their savings.
The move is aimed at attracting more foreign capital.
Effective from December 6, 2024, banks are allowed to raise fresh FCNR (B) deposits of 1 year to less than 3 years maturity at rates not exceeding ARR plus 400 bps.
They are allowed to raise deposits with maturity between 3 to 5 years at rates not exceeding Alternative Reference Rate (ARR) plus 500 bps.
This relaxation will be available till March 31, 2025.
Foreign Currency Non-Resident Bank deposits or FCNR (B) deposits are accounts where NRIs can keep their earnings in foreign currencies like USD or GBP.
RBI has also decided to introduce the Secured Overnight Rupee Rate (SORR).
SORR is a benchmark based on the secured money markets.
Financial Benchmarks India Ltd (FBIL) will take this proposal forward.
The proposal is in line with the recommendation of the RBI’s Committee on the MIBOR Benchmark.
The Committee on the MIBOR Benchmark was headed by Ramanathan Subramanian.
It was set up to review the rupee interest rate benchmarks in the country, especially the usage of Mumbai Interbank Outright Rate (MIBOR).
