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Reserve Bank of India today announced a raise in the interest rate caps on diaspora’s foreign currency deposits, in a move aimed at attracting more capital flows amid pressures on Rupee.
Announcing the fifth bi-monthly monetary policy for the current financial year, Governor of R.B.I. Shaktikanta Das said it has been decided to increase the interest rate ceilings on Foreign Currency Non-Resident Bank deposits or F.C.N.R. (B) deposits, as per tenors.
It can be noted that the move comes at a time when Rupee has been hitting lifetime lows against the dollar and Reserve Bank of India (R.B.I.) seems to be deploying forex reserves to contain the volatilities, as seen in the sharp fall in the kitty over the last few weeks.
Starting today, banks have been now permitted to raise fresh F.C.N.R. (B) deposits of 1 year to less than 3 years maturity at rates not exceeding Overnight Alternative Reference Rate (A.R.R.) plus 400 basis points, as against 250 basis points earlier.
Similarly, deposits with maturity between 3 to 5 years can be paid an interest of A.R.R. plus 500 basis points, as against the 350 basis points ceiling earlier, Shaktikanta Das said.
Notably, relaxation will be available only till March 31 next year, Governor of R.B.I., said.
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