With free float of rupee, CBSL withdraws higher interest rate for forex deposits

Monday, 14 March 2022 00:27 - - {{hitsCtrl.values.hits}}

With free-floatation of the rupee the Central Bank has withdrawn the precious scheme of offering highest interest rates on foreign currency deposits by banks.

In issuing the fresh directive, CBSL said the move was after considering the recent monetary policy tightening measures and the expected macroeconomic developments and the prevailing interest rates on foreign currency deposits.

The Monetary Board issued an amendment to the Monetary Law Act Order No. 3 of 2021 on maximum interest rates on foreign currency deposits of Licenced Commercial Bank and the National Savings Bank, removing the existing maximum interest rate limits imposed on foreign currency deposits. Accordingly, Orders two and three of the cited order have been deleted.

Previously banks were told that with a maturity of less than or equal to one year shall be based on the simple average of the primary market yields of 364-days Treasury Bills determined at auctions held during the last calendar month of the previous quarter less 150 basis points, or 5%, whichever is higher and; with a maturity of more than one year shall be determined based on the market behaviour.

In the case of Special Deposit Accounts in FCY, the additional interest rate that can be offered or paid shall be over and above the interest rate applicable.

The auctions for calculating the above average rate, shall be selected based on the auction date falling within the corresponding calendar month, and not the settlement date. The maximum interest rates for the forthcoming quarter shall be computed on the last working day of the current quarter

When the earlier scheme was announced on 30 December 2021 banking analysts said maximum rate could be as high as 6.5% for normal FCY deposits and 8.5% for Special Deposit Accounts.