High interest rates allure $3.2 bn NRI deposits in April
By Neelima Shankar
Jun 14, 2012
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Depreciating value of the Indian Rupee clubbed with high interest rates being offered on foreign currency deposits have seen a record deposit of $ 3.2 bn in deposits from NRI in the month of April against $ 407 million a year ago.

The Nonresident community deposited $ 2.18 bn in the month of March. These values when compared with previous year values show some hope for the forex deposits in the country; deposits for FY11-12 and FY10-11 stood at $ 11 bn and $ 3.2 bn respectively. Total deposits at end of April 2012 were $58.8 bn up $6.5 bn in a year.

Ever since the RBI deregulated the interest rates on these two NRI fixed deposits scheme, Non Resident external (NRE) and Foreign currency nonresident (bank) {FCNRB (B)} saw a surge of deposits.
NRE is a bank account where the money is kept in Indian Rupees and the depositor has to bear the exchange rate risk; while in case of FCNR (B) the bank bears the exchange rate risk while the money is repatriated. Both the accounts are repatriable.

Repatriation is the option of moving the money back from the bank to bank to the investor's country.

The interest rates being offered in India are higher compared to many locations; the depreciating value of Rupee has doubled the benefits for the NRIs looking to find best options.

Last month, the banking regulator had increased the interest rates from 125 bps +Libor swap rates to 200 bps +Libor swap for 1 year to 3 year deposits; for deposits of 3 year to 5 years it was increased from 125 bps + Libor swap to 300bps + Libor swap.


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