Banks Raised Interest Rates For NRI Deposits

In India, there was a time when Non-Resident Indian (NRI) deposits were given less importance due to their low interest rates. But now due to the new directive announced by RBI on Dec 16, 2011 regarding deregulation of interest rates on NRE (Non-Resident External Rupee) Deposits and NRO (Ordinary Non-Resident) Accounts, more foreign currency is being expected to enter into Indian Banking industry.

As per RBI guidelines, banks are now allowed to determine their interest rates on savings deposits under NRO accounts and term deposits of maturity of one year and above under NRE accounts. With freeing up the interest rates on NRI deposits, a high competition has broken out among Indian banks to attract foreign currency, which in turn is boosting the high expectations regarding strengthening of Rupee.

This is the right time for NRI’s to invest in Indian banks to enjoy high interest rates. Moreover, NRI deposits are entirely repatriable, means NRI’s can close deposits whenever they wish to.

Earlier, banks were supposed to offer 0.2-0.3% interest rate for NRE deposits, but now many banks have come forward offering extremely high interest rates of 8-10% to NRE deposits with a maturity period of one to two years. Depending on the banks, the higher the deposits are, the higher the interest rates will be.

Thus, the interest rates on these NRI deposits are now comparable to the domestic rupee deposits. This attractive option by RBI would maximize savings for NRI customers and more often, analysts predict that NRI deposits worth $10 -$15 billion will now likely enter into Indian Banks.

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