The Reserve Bank of Indian on Friday raised the interest rate on foreign currency deposits for non-residents by up to 1.75 percentage points, and has deregulated the ceiling rate on export credit in a bid to check the decline in the value of rupee, which on Friday fell to 53.47/48 per dollar — its four-month low.
The Indian currency has been on a continuous decline since late February, when it was around 48.94 against the US dollar, and has depreciated around 9% since then. “The measures are aimed at augmenting foreign currency inflows to banks which in turn would facilitate their foreign currency loans to exporters,” the central bank said in a press release. These measures will come into effect from Saturday.
The central bank relaxed the interest rate ceiling on foreign currency non-resident (FCNR) deposits of banks with maturities of one year to less than three years to 200 basis points above the LIBOR or swap rate, from 125 basis points now. On three to five-year maturity FCNR deposits, the rate ceiling will be relaxed to 300 basis points above LIBOR.
The currency is down 2.3% for the week, closing at 53.47/48, putting it close to the record 54.30 low in December.