Subject: [Goanet]EXPATS: Limit on interest rate on Indian expatriates' rupee deposits
Limit on interest rate on Indian expatriates' rupee deposits The RBI directive, to be implemented with immediate effect, says: "The interest rates on fresh repatriable non-resident (external) rupee (NRE) deposits for one to three years contracted effective July 17, 2003, should not exceed 250 basis points above the LIBOR/SWAP (risk free) rates for U.S. dollar of corresponding maturity." Observation: The State Bank of India is offering a large bond to expat Indians - after swap considerations, this bond will only appeal to U.S. Indians as the diffential is just about worth the effort involved. LIBOR - London interbank offered rate. One would have to be very lucky indeed in these days of sophistication if any Indian bank of credit worth would offer 250 basis points (2.5 percent) interest above LIBOR. When a swap is generated usually it will equate to the differential in the two currencies interest rates, so if one buys forward dollars or forward rupees it should in theory be the spot rate ( prevailing dollar/rupee rate) and the difference in the interest rates over a specified term, hence to benefit one would have to have the currency one is investing in, to move in one's favour. Cheers, Gabe Menezes. ########################################################################## # Send submissions for Goanet to [EMAIL PROTECTED] # # PLEASE remember to stay on-topic (related to Goa), and avoid top-posts # # More details on Goanet at http://joingoanet.shorturl.com/ # # Please keep your discussion/tone polite, to reflect respect to others # ##########################################################################
