Expect higher interest rates on long term NRE deposits

Non-resident Indians (NRIs) are set to get higher interest rates on their tax-free non-residence external (NRE) fixed deposits with maturities of three years and above.
The Reserve Bank of India (RBI) on Wednesday deregulated the interest rate offered by banks to NRI. Banks, till now, were not been allowed to pay higher interest rates for NRE deposits than those for resident ones.
“"... It has been decided to give banks the freedom to offer interest rates on such (FCNR, NRE) deposits without any ceiling. The extant ceiling on non-resident ordinary accounts shall continue," RBI said in a notification.
“The instructions will be valid up to November 30, 2013, subject to review," it added.
A few national and cooperative banks continue to offer 9.50 per cent on NRE deposits of 365 to 730 days; rates for long-term deposits (three years to seven years) were ranging between 8 and 8.5 per cent, as banks don’t want to lock their liabilities at higher interest rates. However, things seem to have changed following the RBI announcement.
Karnataka Bank, a Mangalore-based private sector bank, has raised its NRE interest rates across various maturities effective from August 16. For deposits above 3 years to 5 years, the rate now stands at nine per cent.
In the UAE, banks offer between 1.5 per cent and four per cent on fixed deposits.
This website reported on August 12 that Union Bank of India (UBI) was luring NRI depositors, assuring doubling of their deposits in 91 months with annual interest rate of 9.25 per cent and an annualized yield of 13.37 per cent.