The rupee is in a free-fall and everyone is shying away, including non-resident Indians (NRIs), who are expected to reap a bounty from the currency’s plunge.
Though NRIs’ investments in dollars are expected to fetch them higher returns, banks reported a dip in flows of NRI deposits by 16% to $5,497 million in April-June against $6,553 million a year-ago, according to data released by the Reserve Bank of India.
Bankers said inflows were higher last year, as interest rates on NRI deposits were hiked from 3% to 9%.
“Flows were higher last year because of high rates offered by banks as a result of deregulation of interest rates on such (NRI) deposits,” RK Bansal, executive director, IDBI Bank, told Hindustan Times.
Following the rupee’s fall in December 2011, the RBI had deregulated interest rates on NRI deposits, after which banks hiked rates on such deposits up to 9 % from 3% earlier. The deregulation resulted in a surge in inflows in the January-May period of 2012.
Though the flows came down during the quarter but outstanding NRI deposits went up to $71,079 million at the end of June 2013 from $60,874 million a year ago.
NRIs might be holding on to the money and waiting for the rupee to fall further so that they can maximise their gains, said A Surendran, head, retail and international banking, Federal Bank.