which bank has the best RMB rate

With China looking to turn the renminbi (RMB) into an international currency, several banks in Singapore have begun offering renminbi deposit services. This article takes a look at the rates and details of the offerings from HSBC, Bank of China, DBS and UOB.

Making RMB deposits will involve the conversion of your currency into RMB. Different institutions offer different conversion rates, and these are subject to fluctuations. It is advisable to compare exchange rates at different institutions for better returns.

Similarly, interest rates on deposits vary among different banks, and over different time periods. Customers should consider both the conversion rate and interest rate offered by an institution in order to determine the overall returns on the investment (principal amount + interest earned). Comparing overall returns for identical deposit amounts and time periods at different institutions will help you decide whose services to use.

HSBC's RMB Deposit offerings

HSBC's Multi Currency Savings Account offers RMB deposits with tiered interest rates, so higher savings earn more. The initial deposit required is S$2,000 (or equivalent). This initial deposit will be waived for customers who have Dual Currency Plus and other investments with HSBC. Current interest rates range from 0.20 percent for deposits between RMB10,000 and 349,999, to 0.35 percent for deposits above RMB 350,000.

HSBC also offers RMB time deposits. HSBC Advance customers require a minimum of RMB 250,000 to open a RMB account while HSBC Premier customers require RMB350,000. Current interest rates for all deposit amounts are at 0.25 percent for one-month and two-month terms, 0.35 percent for three-month terms and 0.45 percent for six-month and twelve-month terms.

HSBC's Foreign Currency Deposits also offer capital gains if exchange rates move in the customer's favour. There is no capital gains tax in Singapore, and furthermore, for non-residents, the interest earned on Foreign Currency Deposits is not subject to Singapore income tax or withholding tax.

Bank of China's RMB Deposit offerings

Bank of China, the pioneer in providing RMB services in Singapore, also offers RMB services in its Multi Currency Savings Accounts and Time Deposits. The Multi Currency Savings Account requires an initial deposit of S$1,500 (or equivalent). In order to apply for the Multi Currency Savings Account, customers can visit any of the bank's branches with valid travel documents and proof of address documents, such as utility bills or bank statements.

Bank of China's RMB Time Deposit offers promotional interest rates until the 31st of July 2011, ranging from 1.78 percent per annum for a six-month time deposit of RMB10million (S$1.9million) and above, to a rate of 1.20 percent for a one-month deposit of RMB250,000 to RMB1 million. Deposits have to be fresh, not transferred from other RMB accounts with the bank, and must be by way of foreign exchange conversion at the bank's prevailing foreign exchange rate(s), from non-RMB denominated currencies.

The regular, non-promotional annual interest for RMB 200,000 and above for a six-month term is 0.45 percent, and 0.40 percent for deposits up to RMB 199,999.99. Customers can visit any of the branches with identification and proof of address documents in order to apply.

DBS's RMB Deposit offering

DBS's Foreign Currency Fixed Deposit Account allows the customer to set funds aside for a fixed duration to benefit from a fixed interest rate. Now, the customer can make RMB-denominated fixed deposit placements with a minimum deposit of S$5,000 or its equivalent. Interest rates range from 0.50 percent for bank balances above RMB 2.5million (S$750,000 approximately), to 0.385 percent for deposits below RMB 250,000.

Deposits into the Foreign Currency Fixed Deposit Account are chargeable. If the deposit amount is in RMB, a commission-in-lieu of exchange (min S$10) applies. If it is in a different currency, the notes are converted to S$ equivalent and then re-converted to RMB at the prevailing exchange rates.

UOB's RMB Deposit offerings

UOB has also introduced two RMB deposit accounts. Firstly, the UOB Foreign Currency Fixed Deposit pays interest rates ranging from 0.9 percent for a one-month deposit of at least RMB 250,000, to 1.45 percent for a 12-month deposit of at least RMB 5 million. No fees are required to maintain the account, which can be opened by visiting any of UOB's branches, or via telephone.

Secondly, UOB offers the Global Currency Premium Account exclusively to UOB Privilege Banking clients. The initial deposit and minimum average daily balance is RMB5,000, and the minimum balance fee, applicable when the account's average daily balance for the month falls below the minimum average daily balance, is RMB50. The interest rate is 0.50 percent for deposits less than RMB 250,000, and is automatically escalated to 0.75 percent p.a. for deposits amounting to RMB 250,000 and above.

Risks involved in making RMB deposits

Ensure that you are aware of the risks involved in making RMB deposits:

1. There may be a gain or loss when you convert foreign currency as exchange rates are subject to fluctuation. In addition, you may be subject to foreign exchange controls which may be imposed from time to time.

2. RMB is not a freely convertible currency and is subject to regulation changes initiated by China and/or local authorities. Apart from exchange rates fluctuation risk, customers face liquidity risk. It is important to choose a deposit tenor suitable to your needs.

3. If you withdraw your fixed deposit before it matures, a fee might be imposed, and you might earn less or no interest.

4. Foreign currency deposit accounts, unlike eligible local accounts, are excluded from insurance coverage under the Deposit Insurance Act.

So who offers the best rates? Well it depends on how much you have to deposit, but, at the moment, Bank of China's promotional rate of 1.20 percent is attractive if you have RMB250,000 and above to place.

If you are looking at long-term investments, it is advisable to choose institutions that have a suite of different RMB services that provide you with more options and minimise currency loss. It is also advisable to learn about fund-withdrawal procedures at each institution, as some may require you to make withdrawals in non-RMB currencies.

(Note: 1 CNY = 0.191584 SGD at the time of writing)