Fed Bank sees deposits up 30-35% post NRI deposit cap hike

The Reserve Bank of India raised interest rates on non-resident rupee deposits between one year and three years to 275 bps above London Interbank Offered Rate (LIBOR), up from 175 bps. Federal Bank is one of the banks with a large number of non-resident Indian (NRI) deposits. CNBC-TV18 catches up with Shyam Shrinivasan, managing director and chief executive officer of the bank to get his perspective of business the hike.

Below is the edited transcript of the interview. Also watch the accompanying video. Q: With the recent increase in the cap or what you can pay NRI depositors, have you raised rates and what does that do to your margins?
A: The rates have gone up both on Non-Resident External (NRE) deposits and Foreign Currency Non-Residential (FCNR). We have seen a very handsome increase in flow this last quarter, largely driven by where the rupee is. What it will do to our margins is too early to say, but the NRE deposit per se is a very attractive channel. I do want to see the FCNR grow because overall margin is a function of what we can do with those FCNR deposits. Q: Even FCNR cap has been raised?
A: Yes, it has, it