24.1 C

Flows into NRI deposits nosedive to mere $349 mn in June quarter

Must read

Flow of money into non-resident Indian (NRI) deposits nosedived to a mere $349 million in Q1FY23 from $2.52 billion in Q1FY22.

Outstanding deposits declined to $135.9 billion at the end of June 2022 from $141.5 billion a year ago. Sequentially, deposits also shrank from $139.02 billion in March 2022 and 137.08 billion in May 2022, according to Reserve Bank of India (RBI) data.

The situation was exactly the opposite a year ago when deposits swelled by over $8.4 billion from $132.7 billion in June 2020 to $141.16 billion in June 2021.

Foreign currency depsit (FCNR-B) accounts opened for depositing income earned overseas saw maximum contraction. They declined from $19.69 billion in June 2021 to $15.68 billion in June 2022. FCNR-B deposits were at $16.91 billion in March 2022 and $15.91 billion in May 2022.

The second category-Non Resident External Account (NRE), where NRIs can transfer foreign earnings, also saw a decline in outstanding deposits from $102.92 billion in June 2021 to $98.98 billion a year later in June 2022. NRE deposits were at $100.8 billion in March 2022 and $99.92 billion in May 2022.

However, the trend was exactly opposite for Non-Resident Ordinary (NRO) Accounts where outstanding deposits actually grew from $18.91 billion in June 2021 to $21.31 billion in June 2022. Sequentially, they were stable with $21.3 billion in March and $21.25 billion in May 2022.

In light of the sharp contraction in foreign exchange reserves, RBI on July 7, 2022, took many steps to enhance forex inflows. RBI decided to temporarily permit to raise fresh FCNR(B) and NRE deposits without reference to existing restrictions on interest rates. This relaxation will be available up to October 31, 2022.

Before relaxation, the interest rate on FCNR-B deposits is capped at Overnight Alternative Reference Rate (ARR) for the respective currency/swap plus 250 basis points for one year to less than three-year maturity. For FCNR-B deposits of three years and up to 5 years, the ceiling is overnight ARR plus 350 basis points.

In case of NRE deposits, interest rates can’t be higher than those offered by the on comparable domestic rupee term deposits. As a follow-up, many including State Bank of India and ICICI Bank have tweaked interest rates on FCNR-B deposits and NRE to garner whose effects would be seen over coming weeks.

Source link

- Advertisement -spot_img

More articles


Please enter your comment!
Please enter your name here

- Advertisement -spot_img

Latest article