In a move to encourage the inflow of foreign currency in India, the major banks in India, including Union Bank of India have increased the interest rate offered on USD denominated FCNR accounts.

For FCNR (B) deposits with a maturity period of up to one year and less than two years, the rate has been increased to 2.89 percent from the earlier 2.60 percent.

The rates on FCNR (B) deposits with a maturity period up to 2-years and less than three-years and those with maturity of 3 years to less than four-years, the new rates are 2.38 percent and 2.99 percent respectively (as against the previous rates of 2.49 percent and 2.89 per cent respectively). The rates in the same category of deposits with maturity up to four years and less than five-years, the rate has been increased to 3.52 percent as against the earlier 3.23 per cent. For the deposits with maturity above five years, the revised rates are 3.92 percent as against the earlier 3.49 percent. The changes will come into effect from June 1, 2009.

The bank has reduced rates on the NRE-Rupee term deposits. The new rates for NRE-Rupee term deposits (upto one-year and less than two years) have been decreased to 3.35 percent as against the previous 3.64 percent, whereas for term deposits with a maturity period up to two years, but less than three-years, the rates have been brought down to 3.13 percent as against the previous 3.24 percent. For terms deposits with a maturity period of three years or more, the rate has been set to 3.74 percent against the previous 3.64 percent.

Earlier, State Bank of India had announced an increase in the interest rates on non-resident deposits, with effect from March 1, 2009.

Non-resident Indians can maintain NRE and FCNR accounts with RBI authorised banks. The interest rates on these accounts differs from bank to bank though an upper and lower limit is set for it by RBI.