Outstanding non-resident Indian (NRI) deposit portfolio of Indian banks rose 43.5% year-on-year at the end of January and stood at $99.15 billion, according to Reserve Bank of India?s (RBI) data. However, bankers say the growth in NRI deposits will not sustain going ahead.
?The momentum in NRI deposit growth cannot be sustained now as the rupee is gaining strength,? said Ranjan Dhawan, an executive director at Bank of Baroda. Bankers say that the spike in NRI deposits and the weak rupee in August were the factors driving NRI deposits.
?With the rupee gaining strength, things will fall back to normal levels of growth,? said A Surendran, head of retail and international banking at Federal Bank. ?You will now see NRI deposits growing at 20-25%,? he added.
Non-resident external (NRE) rupee deposits as on January 31 stood at $49.8 billion, up 8% year-on-year. The NRE deposit product has now lost customer interest after Reserve Bank of India (RBI) in January had announced the banks can no longer offer interest rates higher than their domestic deposit rates. According to RBI data, the outstanding foreign currency non-resident (FCNR) deposits stood at $40.7 billion, adding $287 million since December 31. The central bank had shut the swap window for FCNR deposits in November, thereby, removing the incentive given to banks to mobilise the product.
In early September, RBI had said banks will be able to swap the fresh FCNR (B) dollar funds, mobilised for a minimum tenor of three years and over, at a fixed rate of 3.5% per annum for the tenor of the deposit. This is much lower than the market rate of 6-7% which was prevalent then.
In the three month period between September and November, Indian banks were able to raise up to $34 billion through various windows prescribed by RBI. According to sources, a majority of these funds came in through the FCNR window. The outstanding non-resident ordinary (NRO) deposits fell 12.5% to $ 8.64 billion.
