August8 , 2022

HDFC Bank starts two-day NRE deposit drive to attract dollar inflows

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HDFC Bank, India‘s biggest lender by market capitalisation, will open a dedicated two-day window to mobilise NRE deposits offering up to 50 basis points more in interest than existing rates in the category, people familiar with the matter told ET.

The move coincides with the US Federal Reserve’s scheduled decision on policy rates that are expected to rise up to three-fourth of a percentage point.

expects overseas Indians to utilise the special window and buy NRE deposits for 12 to 15 months. The window will be available on July 27 and 28 for NRE fixed deposits where non-resident Indians can invest in rupees, the people cited above said.

“Relationship managers are reaching out to the Indian diaspora across the world, urging them to invest,” one of the persons cited above told ET.

HDFC Bank did not comment on the matter.

Currency conversion risks at maturity, however, must be borne by depositors. The deposit plan proposes to pay 6.8% annually. For 12-15 month maturities, HDFC Bank offers 5.75-6.25% to domestic savers for deposit amounts between ₹2 crore and less than ₹5 crore.

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To be sure, overseas depositors cannot opt for premature withdrawal.

Ahead of Fed’s Rate Hike Decision

The move comes just ahead of the US Federal Reserve’s decision on interest rates. The US central bank is widely expected to raise rates further to restrain inflation. Before that event later this week, HDFC Bank aims to tap the NRI pool of funds, market sources said, potentially prompting other leading banks to follow suit. “With HDFC Bank taking the lead in offering such a bespoke plan, other banks are expected to follow,” said a banker at an overseas lender.

On July 6, the Reserve Bank of India (RBI) permitted banks to garner FCNR (B) and NRE deposits from the Indian diaspora without any interest rate cap. Such relaxations are available until October 31 and November 4, respectively.

The objective is to ensure inbound flows of dollars amid a rush for safe-haven assets worldwide.

Indians living abroad are likely to keep deposits in rupees as doing so takes care of family needs in the country.

“We are aware of certain NRE deposits offering attractive rates for us. I find that there are reasons to subscribe (to these instruments),” said S Basu, an executive with a European multinational and currently based out of Chicago.

The minimum sum required for the proposed deposit plan is Rs 2 crore, but the subscription amount can go up to Rs 150 crore, said a London-based banker who is likely to subscribe to the plan.

NRE and FCNR (B) deposits differ on the approved currency denomination for the respective instruments, with the dollar being the primary unit for the latter category of savings.

Large private banks are quite popular with NRIs, offering them attractive savings plans and bespoke services.

offers 5.25% for deposits above Rs 2 crore to NRIs with maturities more than one year but less than two years.

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