Money & Banking

NRIs deposits in banks treble to $11 b in 2011-12

Arvind Jayaram BL Research Bureau | Updated on November 12, 2019


Monies that NRIs deposited into Indian banks trebled to a record $11 billion in 2011-12.

Interest rates that NRIs earn on rupee deposits were freed in December. In the previous five years, inflows of NRI money averaged $2.9 billion.

The record inflows came amid sharp depreciation of the rupee from 44.5 to a dollar to 51.1

Among the different deposits options open to NRIs, only foreign currency non-resident (FCNR) deposits - where NRIs can make deposits in a foreign currency - witnessed outflows of $431 million in 2011-12 against inflows of $1.33 billion in the previous year. The FCNR outflows were more than offset by a surge in inflows into non-resident (external) rupee accounts (NRE).

These accounts saw inflows of $7.5 billion during the 12-month period, from outflows of $280 million the previous year.

Of this, $4.5 billion came in during the last quarter of the fiscal, after interest rates on these deposits were freed. Some banks now offer rates as high as 9-10 per cent on these accounts.

Non-resident ordinary (NRO) rupee accounts (where deposits cannot be repatriated) also saw substantial inflows of $3.9 billion during April-March.

The aggregate value of NRI deposits held by Indian banks stood at $57.9 billion by March 31 2012, provisional RBI data show.

Non-resident external and non-resident (ordinary) accounts are two different types of rupee-denominated bank accounts permitted by the government for NRIs. While NRE funds are repatriable, NRO money can not be remitted abroad.

FCNR accounts, on the other hand, are denomi- nated in foreign currency and the funds are fully repatriable.

RBI rate hikes

In November 2011, the RBI raised maximum interest rates on NRE accounts for 1 year-plus to LIBOR/SWAP plus 275 basis points.

Many banks raised their interest rates on these accounts.

In December 2011, deposit rates on NRE accounts were deregulated.

Earlier this month, the RBI hiked the cap on FCNR interest rates, raising it to 200 basis points above the LIBOR/SWAP rate for 1-3 year deposits and 300 basis points for deposits with a 3-5 year tenor.


Published on May 12, 2012

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