Private sector lender YES Bank has raised interest rates on foreign currency deposits following the Reserve Bank’s decision to ease norms to boost foreign fund inflows. The lender has hiked the interest rates on its Non-Resident External Account (NRE) fixed deposits by 50 to 75 basis points (bps). The bank has also increased its peak interest rate on Foreign Currency Non-Resident (FCNR) deposits by 20 bps, allowing the Non-resident Indian (NRI) customers to avail healthy returns on their fixed deposit.

“This move is in accordance with the recent announcement made by the Reserve Bank of India (RBI) to aid incremental fund flows,” YES Bank said in a release on Friday.

As per the release, the NRE fixed deposit rate for the tenure of 12 months to less than 18 months has been revised to 7.01% per annum. Similarly, the rate for the tenure greater than 18 months has been revised to 7.25% p.a. These revised rates are applicable for deposits less than ₹5 crore.

Besides, the bank is also offering a peak rate of 4.05% p.a. 4.25% p.a. on the U.S. dollar deposits (USD FCNR) for the tenure of 12 months to less than 24 months. 24 months to less than 36 months.

Commenting on the development, Prashant Kumar, MD & CEO, YES Bank says, “At YES Bank, driving innovation and customer centricity has always been at the core of our banking initiatives. We constantly strive to provide the best-in-class benefits to all our customers across segments. The recent relaxation announced by the RBI to attract forex inflows has allowed us a window to hike interest rates on our NRE and FCNR Fixed Deposit offerings, thus extending the benefit to our customers.”

“This initiative is in alignment to the various strides the bank has taken in the recent past to benefit customers, which will allow us to further diversify and grow YES Bank’s retail portfolio,” he adds.

Several banks, including State Bank of India, HDFC Bank, and ICICI Bank, have revised the rates on foreign currency (non-resident) deposits after the central bank relaxed foreign investment rules to shore up forex inflows.

In July this year, the RBI had announced a slew of measures to diversify and expand the sources of forex funding in order to mitigate volatility and dampen global spillovers. As part of the central bank's new measures, foreign investors can now invest in short-term corporate debt. The RBI has also allowed FPIs to purchase more government securities under the fully accessible route.

Foreign currency non-resident deposits and NRE deposits will be exempt from the maintenance of cash reserve ratio (CRR) and statutory liquidity ratio (SLR). This relaxation will be available for deposits mobilised up to November 4, 2022. However, transfers from Non-Resident (Ordinary) (NRO) accounts to NRE accounts shall not qualify for the relaxation.

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