Non resident Indians (NRIs) have more than doubled their fund flow to Indian banks during the first six months of the current fiscal.
The banks have mobilised around $2.7 billion during the first half of the fiscal from the NRIs as against $1.1 in the corresponding period a year ago. The latest data by Reserve bank reveals that most of the inflow took place between April and July.
A senior official at Bank of Baroda, a leading public sector bank, said that huge inflows were being seen through various NRI deposit schemes. Bank of Baroda has a considerable presence among state-owned banks in the NRI deposit market.
This move of Non resident Indians is contrary to the trend that is being followed by the resident Indians. As the banks have started decreasing the deposit rates, resident Indians are shifting their money to other investment avenues that they feel would yield greater interests. Term deposits mobilised by the banks were lower in April-September period at Rs 3,57,000 crore as against Rs. 3,68,000 in the comparable period last year.
Recently, in a bid to reduce the cost of funds, central bank and IDBI bank have lowered deposit rates by 25 -50 basis points.
As part of its corrective measures to fight the adverse impact of global meltdown, RBI had increased the ceiling on interest rates for foreign currency non-resident (FCNR(B)) accounts and non-resident external rupee account (NRE(RA)) by three times between September and November last year. The ceilings are aligned to six months LIBOR (London Inter Bank Offer Rate). LIBOR is the rate at which banks overseas lend to each other.
NRIs park their funds in three schemes FCNR(B), NRE (RA) and the non resident ordinary rupee accounts. The inflows under the first two schemes are repatriable while inflows under the last scheme are non-repatriable.