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RBI cuts CRR by 1%, raises interest rate ceiling on NRI deposits
Thursday, Oct 16, 2008

After the Reserve Bank of India reduced the CRR (Cash Reserve Ratio) was by 150 basis points or 1.5% effective October 11, it has announced another cut of 1%. Now CRR stays at 6.5 per cent. Besides this, RBI decided to provide Rs. 25,000 crore to banks as the first instalment under the Agricultural Debt Waiver and Debt Relief scheme of the Government. RBI has also raised the interest rates ceiling on non-resident Indian (NRI) deposits. This move is intended to attract foreign currency funds to the country. Currently, the interest rate ceiling on FCNR (B) deposits of all maturities has been fixed at Libor or Euribor or Swap rates for the corresponding maturities minus 25 basis points for the respective foreign currencies.

The present interest rate ceiling on NR (E) RA for one to three years maturity should not exceed the Libor or Euribor or Swap rates plus 50 basis points for the U.S. dollar of corresponding maturity. Further, banks will be allowed to borrow funds from their overseas branches and correspondent banks up to a limit of 50 per cent of their unimpaired Tier I capital as at the close of the previous quarter or $10 million, whichever is higher, as against the existing limit of 25 per cent. However, the RBI stated that these measures will be reviewed on a continuous basis in the light of the evolving liquidity conditions.

 

 

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