Almost a week after the RBI set interest rates on various non-resident deposit schemes free, HDFC Bank announced on Thursday raised rates on non-resident (external) NRE deposit rates to a staggering 9 per cent from 3.82 per cent.
HDFC bank lifted interest rates to 9 per cent on Non-Resident (External) rupee deposits that are valid for a period of 1-2 years. Rates for deposits with time-frame of 2-3 years have been increased to 8.5 per cent from 3.5 per cent while that for 3-5 year deposits, they now stand at 8.25 per cent from 3.64 per cent. The bank now offers non-resident Indians the same deposit rates as offered to resident Indians.
Earlier in the day, Yes Bank raised rates on NRE deposits to 6 per cent for balance up to Rs 1 Lakh and by 3 per cent to 7 per cent for over Rs 1 Lakh balance. It has also changed NRE fixed deposit rates to the same level as domestic rates to 9.6 per cent.
"Further, the interest rates on NRE Fixed Deposits, which were earlier regulated & linked to LIBOR, has also been increased to mirror the Resident Term Deposit Rates of 1 year and above, with a peak rate of 9.60% currently," Yes Bank said.
This move could attract more savings from NRIs and ensure that dollars and other currencies pour in. If more banks follow HDFC Bank’s strategy, it will help arrest the slide in the rupee.
The Reserve Bank had on December 16, announced a deregulation in interest rates, that gave banks the freedom to fix rates on Non-Resident (External) rupee deposits and Ordinary Non-Resident (NRO) accounts.
RBI had, however, said that interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
The move was initiated by RBI among other things to counter the slide in the Indian rupee. More inflows from overseas would ease the pressure on the rupee which has depreciated over 20 per cent over the past four months. Non-resident Indians remitted $ 55bn in 2010, the highest in any country, according to the World Bank data.
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