The Hindu Business Line : NRI deposits up on higher rates, weaker rupee

The sudden demand for dollar, erosion in the value of the rupee and rise in interest rates for NRI deposits are some of the prime reasons fuelling this growth, bankers pointed out.

“With financial crisis beginning to grip several countries in the West, more and more NRIs are beginning to see India as a safe haven to park their savings. The favourable exchange rate and increase in interest rates for NRI deposits are acting as incentives. There is also a growing perception that the rupee might be reaching its low before it appreciates again,” Mr M. Venugopalan, Chairman of Federal Bank, said.

NRO attractive

from close to Rs 38 to Rs 48. The most attractive NRI deposit remains NRO deposits, which command very handsome interest rates.

“After remaining stagnant and sometimes even falling, the corpus of NRI deposits has shown a sudden surge during the past two weeks. Earlier, the stream of remittances had continued but little of it was retained as NRI deposits ,” said Dr V.A. Joseph, Chairman of South Indian Bank.

Reducing Options

Earlier, the funds were often diverted into more lucrative avenues of investments such as real estate, stock market and gold, often at the cost of accretion to NRI deposits. “Several of my friends and colleagues have begun to take loans from Dubai and Sharjah-based banks and remit money back home. With the conversion rate going up from Rs 38 to Rs 48 to a dollar, we stand to gain almost 25 per cent in exchange rate. While bank advances in the Gulf countries come at 5 to 6 per cent, the returns on Indian deposits are as high as 10 per cent. I am also arranging for a loan with a local bank to remit the money to India since these good times may not last,” said Mr D.J. Mathew, an NRI working in Sharjah.

However, those with an eye on repatriating their savings seem to prefer the FCNR deposits despite lower rates.

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