NRI deposits in India reach $162.7 billion, marking a significant growth driven by higher interest rates and a weakening rupee
Non-Resident Indian (NRI) deposits in India have surged to a 10-year high, fueled by the rising interest rate differentials between India and global markets. According to data from the Reserve Bank of India (RBI), outstanding NRI deposits as of October 2024 stood at $162.7 billion, reflecting a 13.4 per cent year-on-year growth, the highest in the past nine years, reported thehindubusinessline.com.
NRI deposits see significant rise in FY25
This growth is being driven by a combination of factors, including a favorable interest rate environment in India and a weakening Indian rupee, which has encouraged NRIs to increase their deposits. Net NRI deposit inflows for FY25 are already at $11.9 billion, a noticeable increase compared to $14.7 billion for the entire fiscal year 2024.
NRI deposits include foreign currency deposits such as FCNR (B), non-resident external (NRE), and non-resident ordinary (NRO) accounts. FCNR (B) deposits are immune to currency fluctuations and offer higher rates than global markets, making them particularly attractive to NRIs. Both principal and interest on FCNR (B) deposits are tax-free in India and fully repatriable.
Growth driven by FCNR (B) deposits
The strongest growth has been seen in FCNR (B) deposits, which have risen by almost 50 per cent year-on-year. The share of FCNR (B) in total NRI deposits has reached an 8-year high of nearly 20 per cent. This indicates that NRIs are capitalizing on India’s more attractive interest rates and viewing the country’s economy as stable.
Analysts point to a strategic shift
According to Sachin Sachdeva, Vice President and Sector Head – Financial Sector Ratings at ICRA, the growth in FCNR (B) deposits highlights the strategic shift among NRIs towards India due to favorable interest rates. Federal Bank also reported a 14 per cent year-on-year growth in FCNR deposits, crediting both their deposit mobilization efforts and the weak rupee, which encourages NRIs to remit more funds to India.
However, Sachdeva also cautioned that if the outlook for the rupee turns negative, it could affect NRE and NRO account balances in the future.
India continues to lead in remittances
India remains the world’s top recipient of foreign remittances, with an estimated inflow of $129 billion in 2024, according to a recent World Bank report. Other countries in the top five include Mexico, China, the Philippines, and Pakistan.
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