NRI deposit inflows plunge 10% in April-July to $6.66 bn

Leveraged NRIs on returns trip may fuel FCNR inflows

“Last year,the higher rates on NRI deposits was a new thing and they were coming in heavily. Moreover,since the rupee was extremely volatile in the July-August period,NRIs were waiting for an acceptable level to deposit money,” said A Surendran,head-retail and international banking,Federal Bank.

NRI deposits: RBI to subsidise banks

In the first five months of this financial year,Federal Bank had seen 20% growth in NRI deposits,Surendran confirmed.

In the quarter ended June 30,Federal Bank reported a 51% year-on-year rise in NRE deposits to R15,108 crore while NRI deposits clocked growth of 32% year on year to R17,000 crore over the same period.

In case of India’s biggest bank,State Bank of India (SBI),outstanding NRI deposits as on June 30 stood at R84,943 crore,of which R54,912 crore came through the non-resident external (NRE) rupee account route,Dipankar Purkayastha,general manager (personal banking business unit),had said.

Outstanding foreign currency non-resident (FCNR) deposits were steady at $15 billion,as on July 31. The FCNR route is expected to garner more deposits as banks try and woo more customers to invest further,now that the RBI has made the product viable for banks.

VR Iyer,chairperson and managing director at Bank of India,hopes that her bank will be able to raise at least $50 million through the FCNR window.

Dena Bank has already started canvassing for its foreign currency non-resident (FCNR) deposit product aggressively. “Our current FCNR deposit portfolio stands at around R580 crore and we expect to bring in another $8-10 million before the RBI window closes,” said Ashwani Kumar,chairman and managing director,Dena Bank.

Last week,the central bank said that banks will be able to swap fresh FCNR (B) dollar funds,mobilised for a minimum tenor of three years and over,at a fixed rate of 3.5% per annum for the tenor of the deposit. This is much lower than the market rate of 6-7%, bankers noted.

The move was announced to allow banks bring in more foreign currency. According to estimates by certain analysts,banks are expected to bring in $10-12 billion through the FCNR route alone over the next three months. The window is open till November 30.

The RBI also partially deregulated the interest rate offered on FCNR deposits of three and five years tenor by raising the ceiling to 400 basis points over Libor,from the earlier limit of 300 bps over Libor.

The lowdown

* According to data collated by the Reserve Bank of India,outstanding NRI deposits stood at nearly $73 billion as on July 31. Of this,$48.63 billion came through the NRE route while $8.96 billion came through NRO rupee deposits

* In the quarter ended June 30,Federal Bank reported a

51% year-on-year rise in NRE deposits to Rs 15,108 crore

while NRI deposits clocked growth of 32% year-on-year to Rs 17,000 crore over the same period

* In case of SBI,outstanding NRI deposits as on June 30 stood at Rs 84,943 crore,of which Rs 54,912 crore came

through the NRE rupee account route

* The FCNR route is expected to garner even more deposits

as banks woo customers,with the RBI making the product viable for banks