Last week, the Reserve Bank of India (RBI) deregulated interest rates on NRE deposits and NRO accounts. Simply put, banks are now free to fix the interest rates on these accounts. However, the new rates will be applicable only on fresh deposits. You will also be able to get the revised deposit rates on renewal of maturing deposits. Nonresident Indian customers stand to benefit since they are likely to get better rates than earlier.
NRE AND NRO ACCOUNTS Both NRE and NRO accounts can be of four types: savings, current, recurring and fixed deposit. The accounts can be held only in Indian rupees. only in Indian rupees.
NRE accounts let you deposit your foreign currency earnings by transferring the funds from your country of residence or from other NRE accounts in India. Also, funds in NRE accounts can be repatriated, which means that the funds can be converted to any foreign currency.
INTEREST RATE Banks are now free to determine interest rates on both savings and term deposits of maturity periods of one year and above under NRE deposit accounts and savings deposits under NRO accounts.
The rates on NRE and NRO deposits cannot be higher than what the banks offer on domestic rupee deposits.