HDFC Bank, India’s largest private sector lender, has increased the interest rate on its three- to five-year Foreign Currency Non-Resident (Bank) [FCNR(B)] dollar deposits by 25 basis points to 6.25 per cent from 6 per cent. The revised rate came into effect from August 1 as banks step up efforts to attract foreign currency deposits under the Reserve Bank of India’s (RBI) concessional swap scheme.
The rate hike comes at a time when the RBI’s special swap window is entering its final two months, a period expected to witness increased mobilisation of FCNR(B) deposits. Banks are focusing on attracting overseas funds to strengthen foreign currency inflows.
Among other major private sector banks, ICICI Bank and Axis Bank continue to offer 6 per cent interest on three- to five-year dollar FCNR(B) deposits. The State Bank of India (SBI) is also offering 6 per cent on five-year FCNR(B) deposits above $1 million.
Several smaller lenders have also revised their rates to remain competitive. AU Small Finance Bank has raised its peak interest rate on FCNR(B) deposits with a three- to four-year tenure to 7.4 per cent from 7.1 per cent.
The move follows strong foreign currency mobilisation under the RBI’s concessional swap facility. The central bank recently stated that banks had attracted nearly $41 billion in foreign currency inflows as of July 31 through fresh FCNR(B) deposits, overseas foreign currency borrowings and external commercial borrowings.