Dear Sir,

Please refer to the paragraph 71 of the statement on 'Mid-term Review of the Annual Policy Statement for the year 2004-05' enclosed to Governor’s letter MPD.No.256/ 07.01.279/2004-05 dated October 26, 2004 (copy of the paragraph enclosed).

2. In this context, please refer to item (iii) (a) of Annexure II of our Master Circular DBOD. No.Dir.BC. 9/13.03.00/ 2004-05 dated July 16, 2004 on the interest rates on NRE deposits. On a review, it has been decided that until further notice, the interest rates on NRE deposits for one to three years maturity contracted with effect from November 1, 2004 should not exceed the LIBOR/SWAP rates, as on the last working day of the previous month, for US dollar of corresponding maturity plus 50 basis points. The interest rates as determined above for three year deposits would also be applicable in case the maturity period exceeds three years. The changes in interest rates will also apply to NRE deposits renewed after their present maturity period.

3. An amending directive DBOD No. Dir. BC. 52/13.03.00/2004-05 dated November 1, 2004 is enclosed.

71. With a view to aligning interest rates on Non-Resident (External) Rupee (NRE) deposits with international interest rates, ceiling on NRE deposit rates linked to the US dollar LIBOR/SWAP rates of corresponding maturities was introduced effective July 17, 2003. The ceiling interest rates on NRE deposits have since been revised from time to time. On a review, it is proposed:

• To raise the ceiling on NRE interest rates to LIBOR/SWAP rates of US dollar of corresponding maturities plus 50 basis points from the existing level of US dollar LIBOR/SWAP rates.