Just weeks after the Reserve Bank of India (RBI) deregulated interest rates on non-resident external (NRE) rupee deposits and ordinary non-resident accounts, State Bank of India (SBI), Punjab National Bank (PNB), Kotak Mahindra Bank on Tuesday announced a hike in interest rates offered on NRE deposits by over 5 percentage points.
Private sector lender ICICI Bank is also said to be planning a similar hike in next few days.
The RBI on December 16 deregulated interest rates on NRE rupee deposits and ordinary non-resident accounts to provide greater flexibility to banks to attract dollars.
India’s largest lender SBI raised interest rates on fixed deposits by non-resident Indians of less than Rs 1 crore with a maturity of one to two years to 9.3% against 3.8% earlier. The hike will be effective from January 1, 2012. However, NRE term deposits above Rs 1 crore and of the same maturity will attract 9% interest while term deposits of 2-3 years and 3-5 years’ tenure will also earn 9.3% interest.Punjab National Bank (PNB), the country’s second-largest public sector lender, has also announced a hike in interest rates on NRE accounts to 9.3% effective from the beginning of next year. The bank has decided to increase rate of interests on NRE term deposit to 9.3% for the period ranging from 1 year to 5 years.
Private sector lender Kotak Mahindra Bank has also hiked interest rates on NRE deposits with a maturity of one to two years to 9.3% with effect from Tuesday, while the rate for deposits of 2-3 years’ tenure will be 9%.
Last week, HDFC Bank, Allahabad Bank, IndusInd Bank and Federal Bank had also hiked their respective interest rates on such deposits.