With security of money at a premium during the global financial meltdown, overseas Indians seem to have reposed faith in the country’s banking system.
The inflow of non-resident Indian (NRI) deposits shot upto $3.99 billion at the end 2008-09 as against mere $179 million at the close of the previous year, according to Reserve Bank of India data.
However, the amount outstanding in NRI deposits was lower at $41.26 billion dollars at the end of March, 2009 compared to $43.67 billion at the close of the previous financial year.
After the global financial crisis intensified in September 2008 overseas Indians have preferred to send in part of savings into India for safety of funds. Large per cent of NRI funds were parked in Non resident (external) (NRE) rupee deposits, Bank of India executive director M Narendra said.
The meltdown led to drying of liquidity in the system in global financial system. Its adverse effects were seen in domestic financial system. RBI as step to attract more foreign exchange resources, it raised the interest rate ceiling on NRI deposits.
In September last year, RBI increased the interest rate ceiling on Foreign currency non-resident banks deposits, or FCNR(B) deposits, and non-resident (external) rupee accounts deposits, or NR(E)RA deposits, by 100 basis points.
NRI deposits inflows peaked in March 2009 to $1.44 billion as against $498 million in March 2008. The inflows in the last month of 2008-09 were higher than any other month of year under review.
“I would imagine that RBI’s move to increase the interest cap on NRI deposits has contributed to increasing inflows,” said Partha Mukherjee, president at Axis Bank.
The base of outstanding deposits NRE shot up to $ 2,463 million at end of March 2009 from mere $ 109 million a year ago. The concern for safety was one of the factor behind swelling of NRE deposit kitty, bankers said. The outstanding NRE deposits stood at $23,524 million.
Foreign Currency Non-Resident (Banks) continued show a trend of outflow in 2008-09. The outflow was about $897 million in FY09 as against $960 million a year ago. The outstanding FCNR (B) base stood at $13,271 million.
