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The flow of money into non-resident Indian (NRI) deposits moderated to $1.43 billion in April-August 2022, from $2.44 billion in April-August 2021.
Outstanding NRI deposits declined to $134.68 billion at the end of August 2022 from $141.52 billion a year ago. Sequentially, NRI deposits also shrank from $139.02 billion in March 2022 and 135.39 million in July 2022, according to Reserve Bank of India (RBI) data.
Money into Foreign Currency Non-Resident (FCNR) deposits declined from $19.33 billion in August 2021 to $16.01 billion in August 2022. FCNR-B deposits were at $16.91 billion in March 2022 and $15.87 billion in July 2022. The marginal rise on sequential basis over July 2022 was due to ease of cap on interest rates by Reserve Bank of India to attract more funds in NRI deposits, bankers said.
The second category-Non Resident External Account (NRE), where NRIs can transfer foreign earnings, also saw a decline in outstanding deposits from $102.66 billion in August 2021 to $ 96.95 billion a year later in August 2022. NRE deposits were at $100.8 billion in March 2022 and $97.92 billion in August 2022.
However, the trend was exactly opposite for Non-Resident Ordinary (NRO) Accounts where outstanding deposits actually grew from $ 19.52 billion in August 2021 to $21.71 billion in August 2022. Sequentially, they were stable with $21.3 billion in March and $21.59 billion in July 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 banks 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.
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