Mumbai A day after bankers met the Reserve Bank of India (RBI) to find solutions to a liquidity crunch, the RBI on Wednesday revised the interest rates ceiling with Foreign Currency Non-Resident (FCNR) deposits and increased it by 25 basis points.
RBI has stated that the interest rates on FCNR(B) deposits of all maturities contracted effective close of business in India on March 28, 2006 should not exceed LIBOR/SWAP rate.
About the cash reserve ratio (CRR) of banks, the Reserve Bank of India has taken a step to ease liquidity in the financial system.
The central bank hiked the interest rate ceiling on foreign currency non-resident bank (FCNR-B) deposits by a quarter percentage point.
Ahead of its annual monetary policy on April 18, the RBI has already managed to ease the pressure on liquidity by continuously sterilising the dollar inflow.
The central bank infuses funds into the system through the repo window at 6.5 per cent and absorbs liquidity through the reverse route at 5.5 per cent.
The average daily injection of funds through the repo facility last month was over Rs 15,000 crore. It came down to about Rs 2,000 crore in mid-March.
Hours after RBI Governor YV Reddy’s meeting with the Indian Banks’ Association (IBA), the central bank notified that FCNR deposits would now be accepted at Libor (London Interbank Offered Rate) as against a quarter percentage point below Libor.
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