Some of the private sector banks, however, offer higher interest rates on dollar deposits by NRIs in a bid to shore up their foreign currency accounts
India’s largest commercial bank, State Bank of India (SBI), has slashed interest rates on US dollar denominated deposits – foreign currency non-resident-bank (FCNR-B) deposits – by 11 basis points to 2.47 percent, a move which will further squeeze returns for NRIs (non-resident Indians) on their foreign currency deposits in India.
The 2.47 percent interest rate is for an NRI dollar deposit of a one-to-two year period. If the deposit is withdrawn before completion of one year, no interest will be paid on such deposits.
According to officials at SBI, the bank has reduced interest rates on its term deposits by 25 basis points to 6.25 percent, which will also impact the rupee deposits of NRIs.
Banking sources say many other Indian banks are also expected to slash interest rates on their FCNR-B deposits and also on NRI rupee deposits, taking the cue from the leader, SBI.
The Gulf region accounts for a major part of both NRI bank deposits and remittances to India.
SBI’s move to further reduce interest rates on dollar deposits by NRIs, though in line with the global trend of softening of interest rates on bank deposits, comes at a time when the overall NRI deposits in Indian banks have been on a downward trend since beginning of FY20.
Fresh NRI bank deposits dropped to $4.04 billion during April-August…