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RBI allows banks to fix interest on non-resident (external) rupee deposits

The Reserve Bank of India on Friday, September 12, announced a one percentage point reduction in interest rates on post-shipment rupee export credit and freedom to banks to fix interest rates on non-resident (external) rupee deposits.

The Reserve Bank has also clarified that the proceeds of external commercial borrowings (ECB) and global depository receipts (GDR), which are retained abroad or held in foreign currency account in India, can be sold forward.

With a view to providing incentive for accelerated realisation of export proceeds, the interest rates on post-shipment rupee export credit have been reduced by one percentage points effective Saturday.

In respect of post-shipment credit up to 90 days, the rate of interest will, accordingly, be ''not exceeding 11.0 per cent per annum'', and for period beyond 90 days and up to six months from the date of shipment ''13.0 per cent per annum''. Earlier, the rates of interest were ''not exceeding 12 per cent per annum'' and ''14 per cent per annum'' respectively.

The rate of interest of ''13.0 per cent per annum'' will apply from the date of advance and not only for the period beyond 90 days. This is a temporary measure which will be reviewed later, a statement issued by RBI has said.

With a view to providing greater flexibility to the banks in mobilising non-resident deposits, banks have been advised that effective from Saturday they are free to fix interest rates on deposits of all maturities under non-resident (external) rupee accounts scheme.

The minimum period of maturity of non-resident (external) deposits will however, continue to remain at six months. Hitherto, interest rates on deposits under non-resident (external) accounts scheme with a maturity of six months and up to one year were prescribed at "not exceeding bank rate minus 2.0 percentage points" by the Reserve Bank.

For forward cover for GDRs and ECBs, the Reserve Bank said that the proceeds of ECB and GDR which are retained abroad or held in foreign currency account in India can be sold forward.