Following this decision of RBI, banks immediately reduced FCNR interest, check the new rates
With the Reserve Bank's special swap window closing, major banks have withdrawn significant benefits offered to NRI customers. Returns on foreign currency deposits have been drastically reduced.
RJ Kesari News Desk:The golden era of earning high interest in India by investing in dollars has come to a halt for the time being. Major banks in the country, including State Bank of India (SBI), HDFC Bank, and ICICI Bank, have drastically cut interest rates on Foreign Currency Non-Resident (FCNR) deposits, by up to 310 basis points.
The banks took this significant step as the special swap window opened by the Reserve Bank of India (RBI) closed. The frenzy to raise foreign funds, which had been raging for the past 10 weeks, has now calmed down.
The math behind a sharp drop in interest rates
Banks have withdrawn the additional interest rates they had started offering on long-term (three to five-year) foreign currency deposits. The new rates came into effect on September 1.
HDFC Bank has reduced its five-year US dollar FCNR(B) rate from 6.25% to 3.15%, a significant drop of 310 basis points.
One basis point is equal to one-hundredth of a percentage point. ICICI Bank has similarly reduced its five-year dollar deposit rate from 6.00% to 2.90%, also a 310 basis point reduction.
Changed equation for SBI customers
The situation at SBI, the country's largest public sector bank, is similar. The bank's regular 5-year FCNR(B) rate has now dropped to 3.05%.
Previously, deposits up to $1 million offered a 5.75% return under the "Advantage Scheme," a 270 basis point reduction.
Meanwhile, SBI was offering 6% interest on deposits above $1 million. This has also been reduced by 295 basis points.