Spurred by the rupee's depreciation, NRI deposits jump 48%

Spurred by the rupee s depreciation NRI deposits jump 48percent pardesi news 1459247719

Deposits from non-resident Indians (NRIs) has witnessed a surge, jumping by 48%

According to an article published recently in the Economics Times, says the deposits from non-resident Indians (NRIs) has witnessed a surge, jumping by 48% in the first four months of the present financial year. The article says the first four months of the present financial year “the rupee’s depreciation against the dollar and higher domestic interest rates attracted has global Indians”. According to a recent RBI Bulletin (issued in September), the NRI deposits has climbed further to $6.97 billion in April-July from $4.71 billion a year earlier. Thus the overall outstanding NRI deposits has exceeded to $120 billion.  In a separate news, the NRI deposits in Kerala state banks have recently crossed Rs. 1 lakh crores.

Indians living abroad have now the facility to park their money in either Foreign Currency Non-Resident (Bank) or FCNR (B) deposits and/(or) Non-Resident (External) Rupee Account or NR (E) RA deposits. These accounts are opened as per the choice of the depositors, in the desired permitted currencies, out of the funds received as foreign inward remittances in convertible currency through normal banking channel. Even the interest income from FCNR (B) accounts are exempted from the Indian Income Tax. The NR (E) RA deposits tend to increase when the rupee depreciates, while the foreign exchange risk is borne by banks in FCNR (B) deposits, where the depositor bears the risk. In India banking terminology, the term NRI accounts refer to the funds deposited by the NRIs with the financial institutions authorized by the RBI to provide such services. For more details, please refer to this LINK.

This news certainly signify an important things, that this is certainly a great time for a non-resident Indians, and repatriating money back to India or investing in the country. According to one of the economic analysts, this sharp depreciation of the Indian rupee has provided an opportunity to the money senders sending more money home, which has definitely led to a surge in the NRI deposits.

Experts also say that this depreciation of the Indian rupee is expected to continue in near future as well due to the foreign institutional investor outflows, rising trade deficit and the continuously strengthening dollar. This coupled with Indian deposits providing better interest rates, has certainly created conducive environment for the NRIs to repatriate larger sums of money back home.

The analysts further expect the increased global market volatility to weigh on the rupee in the near term. However, together with the record high FOREX reserves at $355 billion and the rising imports cover, India provide reasonable cushion to this sharp volatility. A continued surge in inflows may also lead the RBI to take corrective steps to contain the sharp currency movements. However, the trend may not be entirely in favor of all NRIs abroad. If one repatriates the rupee investments to the country where he or she stays, one perhaps stands to lose.

About the author

Patrick Callahan

Pardesi News Reporter

Pardesi News Reporter

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