Indian banks are likely to bring down rates offered on foreign currency non-resident (banking) deposits, following the rate cuts effected by the US Federal Reserve last week and the Bank of England yesterday.
Bank of India yesterday cut rates on FCNR dollar deposits by 0.5 percentage points at the shorter end. It is now offering 4.75 per cent on deposits of six months-to-two years and 4.50 per cent on two-three years.
"The perception is that dollar rates are likely to fall further. The swap rate, or the rate at which fixed rate borrowings are swapped for floating rate borrowing, is also inverted. Hence, the inverted structure on our FCNR deposits," said a senior BoI official. Earlier, the bank was offering higher rates at the longer end.
Other banks are also considering cutting FCNR rates. "We will take a decision next week," said a Bank of Baroda (BoB) official. BoB had pared FCNR deposits rates effective September 21.