Fresh NRI deposits in India have nearly doubled this year to $6 billion, and FCNR (B) deposits tailored specifically for non-resident Indians (NRIs) saw significant inflows. According to data released by the Reserve Bank of India’s monthly bulletin, fresh FCNR (B) inflows spiked significantly between April and October this year versus an outflow of $841 million from this account from April-October in 2013.
Overall NRI deposits reached $6 billion during April-October 2023, nearly tripling their prior total of $3 billion during this same time last year due to higher interest rates offered in India than could be found anywhere else, exceeding returns offered by American banks by over five times (SBI FCNR (B) returns exceeded 5% while similar products from U.S. banks provided only 3%).
This spike can also be attributed to the Reserve Bank of India’s temporary relaxation of cash reserve and statutory liquidity ratio requirements on fresh FCNR inflows, further increasing bank returns while encouraging them to invest in higher-yielding assets.
Madan Sabnavis, Chief Economist of Bank of Baroda, attributes increased deposits to work opportunities post-Covid.
However, bankers warn that rapid inflows may not continue at this rate for much of this fiscal year. Furthermore, NRE (RA), open to NRIs willing to assume currency risk and meet specific criteria such as minimum withdrawal threshold, has seen moderate gains to reach $1.95 billion between April and October 2023-24.
Analysts note an upswing in interest for NRE (RA) due to expectations that rupee depreciation won’t significantly rise against the dollar, with some expecting even stronger rupee performance over time.
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