It’s not foreign funds alone which are bringing in huge dollars. Inflows from non-resident Indians into two deposit schemes offered by banks rose nearly 10 times month-on-month to touch the $1.3 billion mark in October.According to the RBI, inflows into a repatriable rupee deposit scheme offered to expatriate Indians rose to $659 million in October from $128 million in September and $193 million in August. Inflows from NRIs into a foreign currency deposit scheme which offers rates at a quarter percentage point below LIBOR, also rose to $600 million from $8 million in September and $44 million in August.Some of the $5.2 billion redeemed through the Resurgent India Bonds in the first week of October may have made its way back into these deposits. Indian commercial banks can still pay up to a maximum of 25 basis points above the dollar LIBOR to expatriates investing in local currency deposits. The central bank, in a bid to stem debt-creating dollar inflows, told banks on July 17 that they could offer rates of up to 250 basis points above the dollar LIBOR on rupee deposits offered to expatriate Indians. The central bank further lowered the cap on rupee deposits on October 18 to 25 basis points above LIBOR. The rupee gained 5.2% against the dollar in 2003 on the back of strong inflows from expatriates, exporters and foreign investments. These inflows have pushed up India’s forex reserves to a record high of more than $102 billion. India’s reserves are now the sixth-largest in Asia. (With Reuters)
