Money & Banking

Long-term NRI deposits, a better bet than bond issue: SBI chief

Our Bureau Mumbai | Updated on August 12, 2013 Published on August 12, 2013

Though liberalising deposit schemes for Non-Resident Indians (NRIs) is a good idea, tapping overseas Indians for funds through a bond issue is not, said Pratip Chaudhuri, Chairman, State Bank of India.

“I am in favour of 10-year NRI deposits. After lot of persuasion, the RBI increased the tenure from three to five years. In fact, if you recollect, the time when we had issued the NRI bonds, these were for five years. Ironically, we thought that a five-year bond is good but a five-year deposit is not good. But I’m glad that that thinking has changed,” said Chaudhuri at a press meet organised to announce SBI’s financial performance.

Stiff yield curve

The SBI chief observed that the way the yield curve is, it becomes pretty stiff from five to 10 years. “So, I think, it will be quite in order and prudent to have NRI deposit tenure extended to 10 years.”

Chaudhuri was replying to questions on the Finance Ministry’s plans to liberalise NRI deposit schemes and public sector financial institutions being allowed to raise quasi-sovereign bonds to finance long-term infrastructure projects, which would enhance capital flows into the country.

The SBI chief, however, felt that NRI bonds for infrastructure are not workable because these bonds, if issued, would largely have to be sold in the US where one cannot distribute them on a selective and discriminatory basis.

“For example, if you do a bond issuance in India and say that I will issue only to this gender or to people belonging to one particular language, this is just not on. Therefore, NRI bonds, I think, are not a good idea,” he said.

“And secondly, bond prices are generally higher than deposit prices. If the idea is to get long-term money from NRIs, why go the long, roundabout and complicated way, why not increase the tenure of the NRI deposits? I think that would be much simpler, cost-effective and would also serve the desired purpose,” said Chaudhuri.

Published on August 12, 2013
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