A low deposit growth rate of 13.4 per cent in the year 2011-12 has been a cause of concern for the banking sector,but it could have been much dire had deposits in NRE accounts not grown by $5.79 billion (around Rs 29,000 crore) during April 2011 and February 2012.
Economists say that the high NRE deposits during the year not only helped better the monetary and deposit growths but also better liquidity.
If this was not there,the deposit growth would have been even bad for the scheduled commercial banks and the liquidity position would have been much tight, said Abheek Barua,chief economist,HDFC Bank.
If we exclude the NRE deposits (Rs 29,000 crore) in the year 2011-12,from the total outstanding deposits (Rs 5,903,658 crore) as on March 23,2012,then the deposit growth for the year would stand at only 12.8 per cent as against 13.4 per cent registered for the year.
According to the data released by the Reserve bank of India the Non-Resident Indians have pumped in a net of $5.79 billion in their NRE accounts in the period between April 2011 and February 2012 and this is highest inflow in the 11-month period in any year over the last ten years.
In the year 2002-03 the inflows in NRE accounts in the 11-month period stood at $5.55 billion.
The high inflow in NRE accounts has been a result of the deregulation in NRE deposit rates in December 2011,following which the incremental deposits in these accounts in the months of December,January and February stood at $2.97 billion.
It was imperative that we had done the deregulation of NRE deposit rates and it has paid-off well. Also a depreciated rupee resulted into higher remittances by NRIs into these accounts beginning August,resulting into an overall better position now, said Barua.