In a meeting of State Level Bankers Committee (SLBC), coincidentally on the very next day of RBI announcing the ramping up of interest rates on FCNR (B), Kerala bankers noted with delight a small increase of Rs 300 crore in NRE deposits in the nine-month period ended December, 2005.
NRE deposits had actually fallen in the corresponding period (March-December 2004) in the previous year, dragging down even the overall growth of bank deposits in the state, SLBC sources told FE.
In Kerala, NRE accounts constitute for as much as 45-47% of the total deposits, wherein rest of India, it constitutes only 10-12% of the total deposits. Compared to the 6.6% growth of deposits in 2005, NRE deposit-effect had hammered down the growth of total bank deposits in Kerala to as low level as 0.96% in 2004.
When a study (Centre for Development Studies - 2004) had found remittances up by 35% in five years, this was not reflected in bank deposits. Tax threat on NRI accounts and interest differentials had set a mass exodus of Keralas NRI remittances to opportunities offered by the booming real estate sector.
RBIs tinkering with FCNR (B) interest rates is likely to show up in the deposit growth with a slight lag, since NRIs are also waiting for the political transition to happen, a senior bank official said.
Banks in the state now command as much as Rs 29,641 crore in NRE deposits (overall deposits: Rs 72,877 crore).