HDFC Bank, the country’s largest private sector lender, has increased the interest rate on its three- to five-year Foreign Currency Non-Resident (Bank) or FCNR(B) dollar deposits by 25 basis points to 6.25 per cent from 6 per cent, effective August 1.
The rate revision comes as Indian banks step up efforts to attract foreign currency deposits under the Reserve Bank of India’s special concessional swap scheme. With the RBI’s swap window entering its final two months, banks are expected to intensify mobilisation of FCNR(B) deposits during this period.
Among other major private sector lenders, ICICI Bank and Axis Bank are continuing to offer a 6 per cent interest rate on three- to five-year dollar FCNR(B) deposits. State Bank of India is offering 6 per cent on five-year FCNR(B) deposits above one million US dollars.
Smaller banks have also joined the competition by offering higher returns to attract non-resident customers. AU Small Finance Bank has increased its peak interest rate on FCNR(B) deposits to 7.4 per cent from 7.1 per cent for deposits with a tenure of three to four years. The bank has also raised rates on Non-Resident External (NRE) fixed deposits for select maturities.
The increase in foreign currency deposit rates reflects growing competition among banks to strengthen their foreign currency resources and take advantage of the RBI’s supportive measures. Analysts expect more lenders to review their FCNR(B) deposit rates as the deadline for the special swap facility approaches.
