After HDFC Bank, more banks may offer higher rates on NRE deposits

After India’s largest private lender HDFC Bank set up a two-day window for non-resident external rupee (NRE) deposits offering significantly higher interest rate than those currently available, more banks are likely to come up with such offers, bankers said.

“We will most likely be announcing a fresh set of rates for NRE deposits in the next couple of days. Our asset liability committee (ALCO) will be meeting to discuss the exact rate and it will be announced very soon,” an executive director at a private bank said.

The window offered by HDFC Bank, which is available on July 27 and 28, offers an annual interest rate of 6.8 per cent on NRE deposits worth Rs 2 crore to less than Rs 150 crore for tenures ranging from 12 months to 15 months.

For domestic deposits worth Rs 2 crore to less than Rs 5 crore with a tenure of one year to less than 15 months, HDFC Bank offers 6.25 per cent, data on the lender’s website showed.

Earlier this month, Axis Bank announced interest rates in the range of 6.30-6.65 per cent for such deposits worth Rs 5 crore to Rs 100 crore and above maturing in 12 months to 15 months.

Domestic deposits of the same quantum and tenure fetch 3.65 per cent to 5.80 per cent, Axis Bank’s website showed.

The steps on NRE deposits taken by the two private lenders comes after the Reserve Bank of India earlier this month temporarily exempted banks from adhering to a regulation that prevented interest rates on NRE deposits outstripping those on comparable domestic term deposits.

The relaxations started July 7 and will be effective till October 31, 2022, the RBI said.

The central bank’s move is aimed at attracting more foreign inflows into India at a time when the rupee has been marking new lows against the US dollar. In NRE deposits, the foreign currency is converted into rupees at the time of setting up the deposit.

Eyeing more foreign inflows

The central bank’s move is aimed at attracting more foreign inflows into India at a time when the rupee has been marking new lows against the US dollar. In NRE deposits, the foreign currency is converted into rupees at the time of setting up the deposit.