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The moderation in fresh non-resident Indian (NRI) deposit inflows may be due to higher rates offered by the overseas banks and re-booking from savings to time deposits to avail higher interest rates, as per the prevailing market dynamics assessment by RBI officials.
This is despite the Reserve Bank coming out with a circular on July 6th on ‘Liberalisation of Forex Flows’ to enhance fresh inflows to the non-resident deposit accounts.
NRI deposits declined by $2.353 billion between June 2022 and September 2022.
“Going forward, the outlook for NRI deposit flows would be conditioned by a host of factors, which include the magnitude of expected slowdown in advanced economies as well as the pace and timing of further interest rate actions,” RBI officials said in an article “State of the Economy” published in the latest monthly bulletin.
As part of measures to liberalise forex flows, banks were permitted to raise fresh Foreign Currency Non-Resident (Bank)/FCNR(B) and Non-Resident (External) Rupee/NRE deposits without reference to the extant regulations on interest rates effective July 7 to October 31, 2022.
Further, incremental FCNR (B) and NRE deposits with reference to base date of July 1, 2022 were exempted from the maintenance of cash reserve ratio/CRR and statutory liquidity ratio/SLR till November 4, 2022.
Overall, in the first half of FY23, NRI deposits increased by $2.789 billion against $1.743 billion in the year ago period.
The UAE, the US and the UK combined constituted about 49 per cent of NRI deposits during September 2022.
Further, the US Dollar continued to be the key currency of FCNR(B) deposits, with its share at around 75 per cent, followed by the Japanese Yen (JPY) and Pound Sterling (GBP) together accounting for 20 per cent.
In terms of the maturity pattern, over one-third of the FCNR(B) deposits were above 3 years on an original maturity basis, followed by deposits above 1 year and up to 2 years (30 per cent).
In contrast, in the case of the NRE accounts, deposits up to 1 year constituted the largest share (47 per cent) based on original maturity.
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