The Reserve Bank of India on 11th November 2021 has decided to permit banks to offer interest rates on Foreign Currency (Non-resident) Accounts (Banks) Scheme (FCNR) deposits using widely accepted ‘Overnight Alternative Reference Rate (ARR) for the respective currency’ with upward revision in the interest rates ceiling by 50 bps.
RBI has amended the following provisions under Reserve Bank of India (Interest Rate on Deposits) Directions, 2016.
- As per section 19(d) the Interest on floating rate deposits shall be paid within the ceiling of swap rates for the respective currency/ maturity and in case of fixed rate deposits, interest shall be paid within the ceiling of Overnight Alternative Reference Rate for the respective currency/ maturity.
- The Overnight Alternative Reference Rate* for the respective currency /SWAP rates as on the last working day of the preceding month shall form the base for fixing ceiling rates for the interest rates offered effective in the following month.
- The interest rates ceiling on FCNR (B) deposits shall be as under:
|Period of deposit||Ceiling rate|
|1 year to less than 3 years||Overnight Alternative Reference Rate* for the respective currency / Swap plus 250 basis points|
|3 years and above up to and including 5 years||Overnight Alternative Reference Rate* for the respective currency / Swap plus 350 basis points|
- The Overnight Alternative Reference Rate for the respective currency / Swap rates quoted/displayed by Foreign Exchange Dealers Association of India (FEDAI) shall be used as the reference for arriving at the interest rates on FCNR (B) deposits.