As part of their efforts to raise more foreign currency resources from Indians abroad, commercial banks have revised rates on dollar- and pound sterling-denominated term foreign currency deposits for some maturities.

The revision is based on the assessment of liquidity, asset liability and interest rate trends, said a senior Canara Bank official. In a statement, Union Bank said for dollar-denominated deposits, the rate for one two years was 2.38 per cent, compared with 2.32 per cent earlier.

For deposits with a maturity period of more than two years, banks have scaled down the rates by one to eight basis points.

For deposits in the British currency (pound sterling) with a maturity period of one to less than two years, the revised rate is 3.12 per cent, against 3.07 per cent earlier. For euro deposits, the rates have been cut across maturities by 10-34 basis points. For the one-to-less-than-two-year bucket, the rate is 3.16 per cent, against 3.26 per cent earlier.

According to Reserve Bank of India (RBI) data, the deposits of non-resident Indians with commercial banks in India stood at $51.97 billion at end of October, slightly higher than $51.68 billion at end of March.

Foreign currency non-resident bank deposits stood at $15.73 billion at the end of October, lower than $15.97 billion at the end of March.

With a sharp drop in the value of the rupee against dollar, RBI has sought to curb speculation in the currency and to improve the supply of foreign exchange. It lifted the ceiling on interest rates for non-resident (external) rupee (NRE) accounts in December. Since then, the rate war among banks has intensified further. Many Kerala-based banks, which have a strong base of non-resident deposits, increased interest rates. The revised rates are on par with those offered for domestic term deposits. NRE deposits of one-year maturity enjoy at least 9.25 per cent returns.

Kochi-based Federal Bank and Thrissur-based South India Bank were the first to announce a rise in NRE term deposit rates last week. However, both have now revised their non-resident deposit rates again to compete with large public and private sector banks. The move follows large lenders like State Bank of India, ICICI Bank and HDFC Bank announcing sharp rises in NRE term deposit rates. (Business Standard)