Facebook Pixel Code

NRI deposits fall in July, show RBI data

Dollar inflows into bank deposits through non-resident Indians tapered off slightly in July after rising for three consecutive months, data from the Reserve Bank of India showed.

Dollar inflows into bank deposits through non-resident Indians tapered off slightly in July after rising for three consecutive months, data from the Reserve Bank of India showed.

Non-resident external rupee accounts saw inflow of $953 million during July, down from $1.87 billion the previous month, according to the RBI’s bulletin.

Foreign currency non-resident accounts which allow NRIs to hold deposits in foreign currency rose by $71 million compared with $99 million in June and $308 million a year ago.

In such deposits the risk of exchange rate fluctuations is done away with as the NRI holds deposits in foreign currency. For NRE accounts, the depositor has to bear the risk of exchange rate fluctuations.

Dollar inflows through NRI deposits had surged during April-June in the wake of a sharp depreciation of the rupee and an increase in interest rates by banks. NRIs had deposited $6.5 billion into Indian banks during this period, almost five times that of the previous year.

Following the RBI’s move to deregulate interest rates on such deposits in December 2011, several banks hiked rates to attract funds. Further, the rupee depreciated to touch an all-time low of 57.32/$ in June, spurring more inflows.

With the currency fairly stable over the last one month, inflows into NRI deposits have slowed in July. On Wednesday, the rupee ended at 55.23/$, marginally up from 55.34 on Tuesday. The rupee has been moving in the 54.90-55.90 band since July.

With some banks cutting domestic term deposit rates, those on NRI deposits may also be cut as the RBI mandates that banks cannot pay NRIs an interest rate higher than the domestic depositor.

However, this may not deter inflows as rates may still be high compared with other asset classes and other markets, bankers said. ?There could be some slowing down but rate cuts may not impact in a big way,? said head of treasury at a private bank.?Liquidity is comfortable, credit growth is not happening, so rate on deposits are getting slashed,? he added.

So far, State Bank of India, ICICI Bank, HDFC Bank and Axis Bank have slashed their domestic term deposit rates. SBI has also slashed its rates on NRI deposit following the cut in that of its domestic term deposits.

Get live Share Market updates, Stock Market Quotes, and the latest India News and business news on Financial Express. Download the Financial Express App for the latest finance news.

First published on: 13-09-2012 at 20:51 IST
Market Data
Market Data
Today’s Most Popular Stories ×