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.
HDFC Bank and Central Bank of India have set their US dollar FCNR-B deposit rates at 6%, while YES Bank and AU Small Finance Bank now offer 7.10%.
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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