SBI, ICICI Bank hike foreign currency deposit rates

Mumbai: State Bank of India (SBI) and ICICI Bank have hiked interest rates on their foreign currency non-resident (FCNR(B)) deposits less than a week after the Reserve Bank of India (RBI) lifted interest rate caps on such deposits.

SBI has hiked its deposit rates for various currencies between 25 basis points and 85 basis points, while ICICI has hiked only the bulk deposit rates by at least 75 basis points following the RBI move. One basis point is 0.01%.

Both ICICI and SBI, have hiked rates on US dollar deposits by the steepest 85 bps. Foreign currency deposits are mostly used by non-resident Indians (NRIs) or the Indian diaspora settled abroad. The US dollar followed by the UK pound and the Canadian dollar are the most sought-after currencies.


SBI is now offering 2.85% on FCNR(B) US dollar deposits above one year but less than two years, up from 2% earlier, and 3.25% on five-year deposits, up from 2.45% earlier. ICICI is offering 3.35% on $350,000 and above for one year to less than two year US dollar deposits, up from 2.50% earlier.

SBI managing director-retail Alok Choudhary said the bank expects an increase in inflows after the hike. "The hikes are already effective and are substantial. We have also hiked rates for deposits denominated in pounds, Canadian dollars and Australian dollars. The funds raised through this route will be used mostly to fund foreign currency borrowings by companies. We will market the product to NRIs and expect to garner more inflows than before," Choudhary said. The SBI hike was effective July 10.

ICICI has so far hiked rates only on bulk deposits above $350,000 with the rates on US dollar-denominated deposits increased by 85 bps while those for the Canadian dollar and UK pound increased by 75 bps each. The bank will also look at increasing interest rates on the foreign currency retail deposits, a person familiar with ICICI's plans said.

Another large private sector lender, HDFC Bank, had increased rates for bulk deposits above $1 million before the RBI announced its measures on July 6. Bhaskar Panda, head-overseas business at HDFC Bank, said even though the hike happened a few days ago before the RBI action, the bank is actively considering hiking retail foreign currency deposit rates.