To attract more capital inflows, RBI has decided to increase the interest rate cap on FCNR (B) deposits. These are foreign currency term deposits that non-resident Indians can open with Indian banks. With effect from Friday, banks are allowed to raise 1-year new FCNR (B) deposits at a rate not exceeding 250 bps over the overnight alternative reference rate (ARR) plus 400 bps over a period of less than 3 years. “Similarly, for deposits with maturities of 3 to 5 years, the overnight ARR has been increased to plus 500 bps from the current 350 bps. This relaxation will be available till March 31, 2025,” RBI said.
Net FPI inflows to India in 2024-25 so far (April-December) have been USD 9.3 billion, supported mainly by inflows in the credit segment. External commercial loans and non-residential deposits, on the other hand, witnessed higher net inflows than last year.
SORR Benchmark
In order to further develop the interest rate derivatives market in India and improve the credibility of interest rate benchmarks, the Reserve Bank has proposed to introduce a new benchmark – Secure Overnight Rupee Rate (SORR) – based on all safe money market transactions. Overnight market repo as well as TREPS.
Collateral Free Loans
Keeping in view the rise in agricultural production costs and overall inflation, the RBI has decided to increase the collateral-free agricultural loan limit from Rs 1.6 lakh to Rs 2 lakh per borrower. This will further increase credit availability for small and marginal farmers.
Panel on AI
To harness the 16 benefits from various technologies while addressing associated risks such as algorithmic bias, interpretability and data privacy, the RBI will constitute a committee comprising experts from various fields to recommend a framework for responsible and ethical enablement of AI. (Free-AI) in the financial sector.
AI solutions
As part of RBI’s continuous efforts to prevent and mitigate digital fraud, an innovative AI/ML based model, MuleHunter. AI is developed by RBIH, Bengaluru. This will help banks to solve the problem of mule bank accounts.