RBI Raises Interest Rate Cap on FCNR Accounts (Banks)/FCNR(B) Deposits for Foreign Currency Non-residents.
- RBI is setting ceilings for interest rates in FCNR(B) deposits from Dec 6, 2024 to attract more foreign capital inflows.
- It is here where banks are allowed to raise fresh FCNR(B) deposits maturity of one year and less than three years as from December 6, 2024 without exceeding the overnight Alternative Reference Rate (ARR) by 400 basis points (bps).
- For deposits ranging from 3 years to 5 years maturity, the cap has been raised to overnight ARR plus 500 bps.
- This is going to be in effect until March 31, 2025.
- This was after the external reserves of the country dipped from a level of an all-time high of $704.89 to $658.091 billion.
- It is worth noting that FCNR (B) deposits can be both countable through residents and originate in any of these currencies: pound sterling, US dollar, Japanese yen, euro, Canadian dollars, and Australian dollars.
