Sunday, November 16, 2008

RBI permits banks to offer better interest rates to NRIs

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After pumping in around Rs 2.80 lakh crore liquidity into the banking system, the Reserve Bank on Saturday announced a slew of measures to give a boost to the real estate sector, in addition to taking steps to arrest decline in forex reserves.

In order to ensure more liquidity for the real estate sector, RBI allowed the registered housing finance companies to raise short-term funds from overseas markets.

"It has been decided to allow, as a temporary measure, housing finance companies registered with the National Housing Bank to raise short-term foreign currency borrowing under the approval route", a release by RBI said.

The decision will also help the country shore up its declining forex reserves, which according to the latest data, has slipped to about USD 250 billion from a high of USD 314 billion in April-May.

In addition, the RBI also permitted Indian banks to offer better interest rates for foreign currency deposits by the non-residents.

Henceforth, the banks can offer rates up to 100 basis points over London Interbank Offered Rate (LIBOR) under Foreign Currency Non-Resident (Banks) scheme and 175 basis over LIBOR on Non-Resident (External) Rupee Accounts deposits.

These changes will encourage the banks to make the non-resident deposit schemes more attractive by raising interest rates.
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