Dollar inflows from non-resident Indians into bank deposits have doubled during April-October this year to $10.14 billion as NRIs took advantage of higher returns and a weak rupee. During the corresponding period last year, inflows were at $4.88 billion.
During the period, non resident (external) rupee accounts saw an inflow of $11.61 billion, almost five times that of last year, data from the Reserve Bank of India showed.
Non-resident (ordinary) rupee accounts and Foreign currency non-resident accounts saw an outflow this year as against an inflow last year. Inflows had surged in April and May after the rupee depreciated sharply. The currency hit an all-time low of 57.32/$ in June. Non-resident (ordinary) rupee accounts saw an outflow of $255 million in October.
“Not only interest rates were higher than other countries, but even on the currency difference the return went up substantially,” said the treasury head of a public sector bank.
To earn returns over and above the high interest rates, NRIs can bring in dollars when the rupee is weak and repatriate once the currency appreciates. Even though the currency has appreciated, inflows into NRI deposits continue as interest rates offered are higher.
Banks on an average offer 7-8% interest rate on deposits with 6-12 months tenure for NRIs. The RBI had deregulated interest rates on NRI deposits in Deceber 2011, which was followed by massive hikes in rates of such deposits by most banks.
While banks have slashed interest rates on deposits over the last three months, NRI deposits still give high returns compared with those of other countries.
Further, the rupee has recouped its losses and stabilised over the last few months. On Monday, the currency ended at 54.51/$, 5.15% stronger from its all-time low.Notwithstanding the rupee’s rise, inflows remain strong with NRE accounts getting an inflow of $1.14 billion in October, higher compared with the $903 million the previous month.
NRO accounts can be opened by both NRIs and foreign nationals who are visiting the country.
Foreign currency non-resident accounts which allow NRIs to hold deposits in foreign currency fell by $135 million compared with an inflow of $454 million in September and $178 million a year ago.