Bandhan Bank on Friday raised interest rates on Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, offering 7.1 per cent on US dollar-denominated deposits of $1 million and above for tenures of three to five years. The bank has also increased the rate on deposits of up to $1 million to 7 per cent.
The offering follows the Reserve Bank of India’s (RBI’s) introduction of a US dollar-rupee forex swap facility for banks on fresh FCNR(B) deposits mobilised for a minimum tenor of three years and up to five years.
This regulatory measure is aimed at encouraging foreign currency inflows into the banking system, the lender said, adding that the initiative is expected to help non-resident Indian (NRI) customers secure stable and competitive returns over a longer tenure while also mitigating exposure to potential exchange rate fluctuations, particularly in the event of rupee depreciation.
Rajinder Kumar Babbar, Executive Director and Chief Business Officer, Bandhan Bank, said: “This offering allows them to lock in competitive returns for a longer duration while effectively mitigating currency-related risks.”
Bandhan Bank said the limited-period offer would be available through its network of nearly 2,000 branches across the country, where eligible customers can open non-resident accounts and avail of the revised deposit rates.
Bandhan Bank’s revision in rates follows the RBI’s removal of the interest rate ceiling on fresh deposits with maturities of three to five years.
Banking industry sources said the central bank’s decision to temporarily withdraw the interest rate ceiling on fresh FCNR(B) deposits in the three-to-five-year maturity bucket until September 30, 2026, followed requests from smaller banks.
Industry sources have said banks are likely to offer up to 7.1 per cent on these deposits.
Before the relaxation, FCNR(B) deposits with maturities of three to five years were subject to a ceiling of the overnight alternative reference rate for the respective currency or swap rate plus 350 basis points (bps).
Most banks have already increased FCNR(B) deposit rates in recent months to attract overseas deposits. While some headroom exists for increasing rates, bankers also say that rates are already very high.
Among major lenders, State Bank of India (SBI), HDFC Bank, ICICI Bank and Axis Bank currently offer rates of up to 6 per cent on FCNR(B) deposits with maturities ranging from three to five years.
State-owned Bank of Baroda (BoB) raised interest rates on FCNR(B) deposits by up to 50 bps on Tuesday, offering a peak rate of 6.25 per cent on five-year deposits.
Some smaller private-sector banks are offering higher rates than their larger peers. Yes Bank offers up to 6.6 per cent on five-year FCNR(B) deposits, while AU Small Finance Bank offers a peak rate of 7.1 per cent on such deposits. CSB Bank increased rates on deposits with maturities of three years to less than four years by 290 bps to 6.95 per cent.
