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Banks want to raise interest on NRI deposits
Tuesday, September 30, 2008

Banks have made a strong representation to Reserve Bank of India to release more cash into their system. Presently the banks are facing a liquidity crunch. Bankers have also urged the RBI to allow them to offer higher interest rate on the NRI deposits. As of now, banks can not offer more than 50 basis points over Libor in NRE deposits and Libor minus 25 bps on FCNR (B).

The demand for cash is visible in the huge borrowings by banks from RBI - banks collectively borrowed a record Rs 90,075 crore from the central bank on Monday, over both its liquidity adjustment facility windows. Borrowings from the RBI have been in the range of Rs 50,000 crore - Rs 80,000 crore over the past couple of weeks. Further, bankers present at the meeting indicated that they expect the demand to rise in the coming quarters. A request was also made for refinancing of oil bonds to provide funds to state owned refiners who are one of the large borrowers. Bankers made this pitch in their first formal meeting with the new governor of the Reserve Bank of India (RBI), D Subbarao.

 

 

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