India is the biggest recipient of recipient of forex remittances at $ 58bn, according to the World Bank statistics. Banks would be able to devise attractive term deposit schemes targeted at non-resident Indians.
After putting curbs on speculative trading in forex markets on Thursday, Reserve Bank of India has liberalised interest rates on non-resident rupee deposits and accounts.
Accordingly, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) accounts with immediate effect.
RBI used to determine interest rates offered to non-resident deposits. It had fixed an interest rate of 4 per cent per annum till date. Now, banks can offer more than 4 per cent to attract foreign deposits.
The move is likely to encourage non-resident Indians to deposit their savings in India at an interest rate competitively offered by various banks.
However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits, RBI said in a release on Friday.
The revised deposit rates will apply only to fresh deposits and on renewal of maturing deposits.
India is the biggest recipient of recipient of forex remittances at $ 58bn, according to the World Bank statistics. Banks would be able to devise attractive term deposit schemes targeted at non-resident Indians.
RBI has also advised banks should closely monitor their external liability arising on account of such deregulation and ensure asset-liability compatibility from systemic risk point of view.
The Indian rupee rose sharply in the early morning trade on Friday after RBI imposed restrictions on overnight open trading positions of banks.
The currency hit an intra-day high of 52.21 in intraday trade before closing at 52.70 to the dollar. The rupee recovered 1.7 per cent against yesterday's close of 53.66 against the dollar. It had hit an all-time low, breaching the 54 mark against the dollar in intraday trade on Thursday.
Analysts have pointed out that the pressure on rupee was due to the poor fiscal situation and less due to speculation in the forex markets.
Source: NDTV
