Attracting savers: Interest rates on non-resident external (NRE) rates were deregulated
HDFC Bank, India’s No. 2 private lender, will raise interest rates on non-resident savings deposits to nine per cent from 3.82 per cent from Friday (December 23), taking advantage of recent deregulation to attract dollars as the rupee hits record lows.
The Reserve Bank of India deregulated interest rates on non-resident external (NRE) rupee deposits and ordinary non-resident accounts last Friday (December 16^ to provide greater flexibility to banks to attract dollars.
HDFC will pay nine per cent interest on deposits of `10m (£121,124/ $189,654) and above, maturing in one-two years, while deposits of `5m-`10m will earn 8.5 per cent, said Abhi Aima, group head of equities and private banking.
Foreigners have been fleeing Indian assets as India’s economic prospects cool, sending the rupee to record lows.
So far this year, foreign investors have been net sellers of $352.5m (£225m) of Indian shares against a record inflow of more than $29bn (£18bn) in 2010.
Earlier in the day, smaller private lender Yes Bank raised its NRE deposit rate by 200 basis points to six percent for deposits of up to `100,000. For balances above `100,000, it raised the rate by 300 basis points to seven per cent.
Yes Bank also raised its domestic savings deposit rates to seven per cent from six per cent, becoming the first bank to raise rates twice this year to help build up its retail business.
Another private lender, Dhanlaxmi Bank, also said it would raise deposit rates for NRE accounts to eight per cent for one-three years and 7.75 per cent for 3-10 years.
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