In a move to increase the inflow of foreign exchange amid the weakening of

RELATED ARTICLES RBI likely sold dollars at 56-level: traders RBI does not rule out selling dollars to oil companies RBI should intervene to check rupee slide: Anand Sharma Direct RBI dollar sales to oil firms possible: Rangarajan RBI to infuse Rs 12k cr into market this week

rupee, the RB) has deregulated interest rates on both non-resident external rupee (NRE) savings deposits and non-resident ordinary (NRO) accounts.

NRE deposits are repatriable money, while NRO accounts have a limit on the amount that can be sent back to other countries. “Accordingly, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under NRE deposit accounts and on NRO savings deposits with immediate effect,” the RBI circular said. “However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits,” RBI added.

Rupee has depreciated around 15 per cent over the past three months. On Friday, it closed at Rs 52.70 vis-à-vis the US dollar, up from Thursday’s close of Rs 53.70.

A senior foreign bank official said, “This is similar to savings rate deregulation. The RBI is trying to make deposit products more attractive for NRIs. This is aimed at attracting dollar inflows to manage rupee volatility.”

Interest rates on term deposits under NRO accounts are already deregulated. A bank has to obtain prior approval of the board/asset liability management committee, while fixing interest rates on such deposits. At any point of time, individual banks should offer uniform rates at all their branches. The new deposit rates will apply only to fresh deposits and on renewal of maturing deposits. The RBI said banks should closely monitor their external liability arising on account of such deregulation and ensure asset-liability compatibility from a systemic risk point of view.