What changed
The ceiling on NRE term deposit rates for 1-3 year maturities was increased from LIBOR/SWAP plus 175 basis points to plus 275 basis points. This applies to fresh deposits and renewals, with the rate for three-year deposits also applicable to longer maturities.
What it means for you
Co-operative banks can now offer higher rates on NRE deposits, potentially attracting more foreign currency inflows. The 100 bps hike gives lenders more flexibility to compete for NRE funds, but may compress margins if not managed carefully.
What you must do
- Update NRE deposit rate slabs to reflect the new ceiling of LIBOR/SWAP plus 275 bps for 1-3 year tenors.
- Ensure renewal rates for existing NRE deposits comply with the revised cap.
- Monitor LIBOR/SWAP rates monthly to set competitive yet compliant deposit rates.
- Communicate the rate change to branch managers and treasury teams for uniform implementation.
Who it affects
State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs), NRE depositors, Treasury departments of co-operative banks
Does this circular apply to all NRE deposits or only fresh ones?
It applies to fresh NRE term deposits and also to renewals of existing deposits after their maturity period.
What is the reference rate for the new cap?
The cap is based on LIBOR/SWAP rates for US dollar of corresponding maturities, as on the last working day of the previous month.
Are deposits beyond three years covered?
Yes, the rate determined for three-year deposits also applies to maturities exceeding three years.