Banks have raised foreign currency non-resident bank (FCNR-B) deposit rates after the Reserve Bank of India said it would fully bear the hedging cost on such deposits until Sept. 30, according to people familiar with the matter.
The rate hikes range between 300 basis points and 350 basis points, taking US dollar FCNR-B deposit rates to as much as 7.10%, the people told NDTV Profit on condition of anonymity.
State Bank of India has raised its three to five years FCNR-B deposit rates to a range of 5.25-6.00%. The five year rate has risen by upto 295 bps; 4 to under 5 year FCNR(B) hiked upto 280 bps; and 3 to under 4 year rate is up by nearly 215 bps.
HDFC Bank and Central Bank of India have set their US dollar FCNR-B deposit rates at 6%, YES Bank has raised rate to 6.60% and AU Small Finance Bank now offers 7.10%.
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The development came after RBI's decision to absorb the hedging cost to attract foreign currency deposits from non-resident Indians. FCNR-B deposits allow NRIs to hold fixed deposits in foreign currencies with Indian banks without taking exchange rate risk against the rupee.
The RBI facility, available until the end of September, is aimed at supporting foreign currency inflows and has given banks room to offer higher returns on these deposits.
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