The Reserve Bank freed interest rates on various non-resident deposit schemes, a move that will help attract more funds from NRIs and arrest the slide in rupee in the forex market.

The decision to de-regulate interest rates on such deposits comes within 24 hours of RBI putting restrictions on forward contract in rupee to check speculations in the forex market.

The decision will give banks the freedom to fix rates on Non-Resident (External) rupee deposits and Ordinary Non-Resident (NRO) accounts with immediate effect.

In a circular, the central bank said: “With a view to providing greater flexibility to banks in mobilising non-resident deposits and also in view of the prevailing market conditions, it has been decided to deregulate interest rates (such accounts).”

“Interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits,” it added.

The deregulation in rates on NRE and NRO deposits is intended to make such funds more attractive at a time when the rupee has depreciated sharply during last few months.