The country's largest lender SBI has raised interest rates on Foreign Currency Non-Resident (FCNR) accounts and Non Resident-External rupee term deposits accounts by 5-15 basis points in order attract higher foreign deposit.
While the public sector lender has raised interest rates by 12-15 basis points on NRE (Non Resident-External) deposits, it has increased rates by 5-15 basis points affective from December 1, 2011.
One basis point is one hundredth part of a percentage point.
In NRE deposits, rates have been hiked to 3.82 per cent from 3.69 per cent for a maturity of 1 year to less than 2 years.
Similarly, interest rates have been increased to 3.51 per cent from 3.36 per cent for maturity of 2 year to less than 3 years. Above three years to five years, it has been raised to 3.64 from 3.52 per cent.
Most of the banks are increasing the deposit rates after the RBI hiked interest rates on Non-Resident (External) Rupee term deposits and Foreign Currency Non-Resident (Banks) deposits, a move expected to increase the flow of foreign exchange amid the weakening domestic currency.
The central bank has said that interest rates on fresh Non-Resident (External) Rupee (NRE) Term Deposits for 1-3 years maturity should not exceed the LIBOR/SWAP rates plus 275 basis points, as on the last working day of the previous month, for US dollar of corresponding maturities.
Earlier, the interest rate on NRE deposits was LIBOR/SWAP rates, plus 175 basis points since November, 2008. The LIBOR rate is the average interest rate that leading banks in London charge when lending to other banks.
The SWAP rate is the exchange rate associated with the fixed portion of a currency swap.
Another public-sector lenders Punjab National Bank and Oriental Bank of Commerce also revised the rates on these deposits in the same range.
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