Attracting NRI inflows: RBI temporarily withdraws interest rate ceiling on fresh FCNR(B) deposits of 3-5 yr tenor

FCNR (B) deposits: Banks’ may face a tricky situation

RBI raised FCNR(B) rates to 6-7% with hedging subsidy through September to attract $40-45 billion in foreign capital. The 200+ basis point differential drives early rollovers of existing deposits; banks absorb unsubsidized hedging costs or lose depositors.