NRI deposit growth stalls for first time

MUMBAI, JULY 3: The growth in non-resident Indian deposits has stagnated for the first time after liberalisation. The total outstanding balance under the four NRI deposit schemes was at $ 20.39 billion as on March 31, 1998 as against $20.38 billion at the end of March 1997. In all the five financial years following the fiscal 1992 till end-1997, the NRI deposits had grown at an average rate of 10.72%.

The growth in the preceding fiscal of 1997 was the highest at 16.9%. If the redemption on account of the dis-continuation of FCNR(A) scheme is taken into account, the net outstandings would have reported a modest growth. But the growth rate on other accounts have been lower compared to the preceding year. Outstandings under individual NRI deposit schemes – FCNR(B), NR(NR)RD and NR(E)RA – have recorded growths of 12.25%, 11.29% and 14.44% respectively, while the preceding fiscal of 1997 achieved higher growth rate at 30%, 58.12% and 27.25% respectively.

Apart from the pressure caused by redemption of FCNR(A)deposits with the Reserve Bank of India, the main reason for the stagnant growth in NRI deposits have been the volatility in the foreign exchange market. In August 1997, the initial period of the Asian meltdown and volatility in the Indian forex market, the net outstanding FCNR(B) the main NRI deposit scheme deposits dipped to $8.159 billion from $8.237 billion in July 1997, indicating a flight of NRI deposits.

The growth in the succeeding months have been slow and uncertain with negative growth reported in October, November, December and February over the preceding months. If not for the surge in FCNR(B) deposits, the total NRI deposits would have shown a negative growth.