NRE deposit rates drastically reduced

There has been a wave of impetus in the market over the move of Reserve Bank of India (RBI) who have taken a drastic step of reducing the interest rates on Non Resident External (NRE) deposits.

The previous move of RBI has fixed NRE deposit rates at LIBOR plus 250 basis points. Currently it has now further compressed the interest rates on maturities for one to three years to LIBOR plus 100 basis points. This decision is assumed to have taken to curb the arbitrage opportunity that may arise as a result of the redemption of Resurgent India Bonds.

The reduced interest rates would now have the effect on the proposed scheme that is supposed to be launched by State Bank of India namely Pravasi Vaibhav as the interest rates have to be reset.