Banks’ 'Certificate of Deposits' rates dip as FCNR flows hit $127 billion
The RBI’s scheme for attracting foreign currency deposits from NRIs has boosted banking-system liquidity, reducing banks’ need to raise funds through CD's.
India's Overseas Currency Non-Resident (OCNR) deposit scheme has successfully attracted $127.2 billion in overseas inflows, causing certificate of deposit (CD) rates to decline. Rates on three-month CDs fell from 7.09-7.23% to 6.3%, and from 7.30-8.00% to 6.7% after the Reserve Bank of India (RBI) launched the scheme on June 5. The central bank reported $136.4 billion in overseas inflows as of August 31, with FCNR(B) deposits contributing $127.2 billion, OFCBs adding $5.3 billion, and ECBs contributing $3.9 billion.
The large liquidity influx has reduced banks' need to raise funds through CDs, leading to lower issuance and cooling CD rates.
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