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RBI tightens cap on NRE rates

MUMBAI OCT. 18. In a bid to curb arbitrage, the Reserve Bank of India today further tightened the ceiling on interest rate on fresh repatriable non-resident (external) rupee (NRE) deposits at 0.25 per cent above London Inter-Bank Offered Rate (LIBOR) for U.S. dollar as against current stipulation of one per cent.

This is third revision in the ceiling on NRE deposit interest rates since mid-July.

The RBI in a release here said that the revised ceiling for deposits of one to three years comes into effect from close of business today until further notice.

This has been done to ensure consistency in interest rates offered to non-resident Indians, it added.

The RBI said the maturity period of repatriable NRE deposits would continue to be one to three years and the interest rate as determined above three-year deposits would also be applicable in case the maturity period exceeds three years.

The changes in interest rates would also apply to repatriable NRE deposits renewed after their present maturity period, it added.

Market sources said today's decision has been taken to keep a check on arbitrage (taking benefit of high interest rates in India compared to those prevalent abroad) possibilities.

On September 15, the RBI had placed set the cap on NRE deposits rate at one per cent above LIBOR, which had been fixed at 2.5 per cent above LIBOR on July 17. — PTI

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