Following RBI Initiatives, Banks Introduce Up to 7% Interest on Dollar Deposits
MUMBAI: Banks are now passing on benefits from the Reserve Bank of India’s free hedging window to non-resident customers. This shift has led to an increase in Foreign Currency Non-Resident (Bank) deposit rates, creating an arbitrage opportunity between offshore borrowing costs and onshore returns.
Meta Partners with Reliance for AI Data Centre
NEW DELHI: Meta has entered into its first artificial intelligence data centre agreement in India, collaborating with Reliance Industries on a 168-megawatt facility in Jamnagar, Gujarat. This partnership aims to secure the computing infrastructure necessary for AI applications, reflecting the growing interest of global technology firms in India’s emerging AI ecosystem.
Under the terms of the deal, Meta will lease capacity at Reliance’s upcoming AI-enabled data centre, which is expected to be operational within two years. Reliance will handle the design, construction, connectivity, and daily operations, while Meta will cover the energy and water costs for its operations. The facility will utilize renewable energy and desalinated seawater for cooling, addressing the significant power and water demands of AI computing.
The agreement comes as technology companies compete to secure data centre capacity for AI workloads. India has become an attractive destination for such investments, bolstered by government incentives. According to government data, the country’s installed data centre capacity is projected to grow from approximately 375 megawatts in 2020 to around 1.5 gigawatts by 2025.
Changes in Deposit Rates
Smaller lenders are making the most significant moves in deposit rates. Yes Bank has increased rates by as much as 335 basis points, offering up to 7.1% on five-year dollar deposits. AU Small Finance Bank is also quoting 7.1% for three-to-four-year tenures, while Karur Vysya Bank offers 7% for three-to-five-year deposits. Larger banks are more cautious, with HDFC Bank offering about 6% and Bank of Baroda around 6% for one-to-two-year deposits. Punjab National Bank has revised its FCNR (B) rates to as much as 6.1%, aligning with the central bank’s efforts to attract foreign currency.
The rupee appreciated nearly seven paise on Wednesday, despite uncertainty affecting equity markets. The new deposit window has emerged as banks face rising funding costs, which have increased their marginal cost of lending rates. Bankers note that current rates on dollar deposits are nearing those of rupee-denominated deposits for NRIs. The scheme, while aimed at NRIs, has broadened the funding options available.
Regulatory changes now permit overseas banks to extend large dollar loans to NRIs for these deposits, allowing them to take exposure to Indian banks.
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