No Additional Interest benefit on NRO, NRE and FCNR deposits (e.g. FD) to NRIs

On July 18, 2012, Reserve Bank of India (RBI) vide  notifications RBI/2012-13/136 and 137, DBOD.Dir.BC. 29 and 30/13.03.00/2012-13 withdrew the discretion given to banks to allow the benefit of additional interest rate of one per cent per annum on NRE, NRO and FCNR (B) deposit accounts.
Banks in India offer benefit of additional interest of 1% to certain account holders being senior citizens and staff members – existing or retired, on Fixed Deposits (FD). This additional interest may also be extended to NRO, NRE and FCNR deposits of staff members of respective banks, whether existing or retired.
As per paragraph 4 and 5 of the directives enclosed to the circular DBOD.Dir.BC.49/13.03.00/2000-2001 dated November 4, 2000 and clarification dated May 13, 2005, interest rate including any additional interest should not exceed the ceiling stipulated by RBI in the case of NRE and FCNR deposits of staff members – existing or retired.
RBI increased the ceiling on FCNR deposits on May 4, 2012 and deregulated interest on NRE deposits on Dec 19, 2012  (please see my blog “15 Important changes related to NRI” for details).
Based on review of circulars, clarifications and notifications, RBI decided that banks should not allow the benefit of additional interest rate on any type of deposits of non-residents (NRI/PIO).
This notification will have effect only to NRI staff members (existing or retired) of respective banks (e.g. State bank of India employee for FD with SBI) as they will not get additional 1% interest rate on their deposits. Other FD holders are not affected except that psychologically, they will feel good as no one else can get higher interest rate now ;).

About Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) Mr. Jigar specializes on NRI Investments and Taxation. He is proud to be one of only 21 CFA Charterholders in India working as consultants. (In 2011, when he became CFA Charterholder, out of 97,173 CFA Charterholders in the World, only 697 Charterholders were in India and only 3% work as consultant; Source: He received his MBA (Finance) from University of Illinois, Chicago, USA, CPA from USA and a Chartered Accountant from India. Jigar has over 15 years of professional experience including more than 4 years with KPMG USA’s Risk Advisory Services. Currently, he provides Wealth Management and taxation consulting serving clients from USA, UK, Americas, Europe, Middle East, Asia, Africa, Australia and India.


  1. I am nri account holder. There is no transaction since last two years. Is the account still active or needed to re-open ?pls reply

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) June 1, 2015 Reply

      Account may be classified as dormant and you may be able to activate it very easily by contacting your bank. Opening new account would be a lot difficult and time consuming. Thanks.

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