India’s banks are wooing the non-resident Indian (NRI), and how.
Barely a week after the Reserve Bank of India (RBI) deregulated non-resident external (NRE) deposits allowing banks the freedom to offer higher interest rates to dollar-denominated accounts — a move aimed at encouraging NRIs to remit dollars into India that will help stem the falling rupee — a string of banks have announced sharp rises in interest rates offered to NRI depositors.
On Thursday private sector lender HDFC Bank raised interest rates NRI deposits by more than five percentage points to 9% — from the previous interest rate of 3.8%.
Dhanalakshmi Bank had announced similar returns to non-resident deposits offering interest rates of upto 8%.
Two other private sector banks — South Indian Bank and Karnataka Bank — both of which have large overseas clients based in west Asian countries, had also announced similar rate hikes for non-resident account holders in the last few days. The Indian rupee has plummeted to record levels breaching the R54 mark against the US dollar recently. It is currently hovering between Rs52 and Rs53 to a dollar.
The rupee has been badly hit as foreign institutional investors (FIIs) are cashing out from Indian markets and diving into safer investment bets such as US government bonds stung by sovereign debt worries in European economies.
“We don’t think we have a fair share of the NRE deposit and the increase in interest rate would allow us to boost that portfolio,” Abhay Aima, head of equities and private banking, HDFC Bank Ltd told HT.