Sunday, November 17, 2024

NRI deposits double to $7.8 bn in April-August, says RBI

 

  • The trend is an expression of strong confidence in domestic economy
  • This growing influx of diaspora-driven deposits reinforces the appeal of India’s economic landscape, as the diaspora continues to view India as a reliable hub for both safe investments and financial growth

PRAVASISAMWAD.COM

The Indian diaspora’s confidence in India’s economic prospects is clear as Non-Resident Indian (NRI) deposit inflows have more than doubled from $3.7 billion to $7.8 billion in the April-August period of this year, as reported by the Reserve Bank of India (RBI). This significant rise in NRI deposits underlines a growing belief in the resilience and potential of the Indian economy.

NRI deposit inflows saw substantial growth across both dollar-based Foreign Currency Non-Resident (Banks) accounts (FCNR(B)) and rupee-denominated Non-Resident External (RA) accounts (NRE(RA)), highlighting attractive returns and robust economic fundamentals. Of the $7.8 billion total inflows, FCNR(B) deposits—held in foreign currency and bearing the exchange risk on behalf of banks—accounted for $3.5 billion. In contrast, $2.5 billion entered NRE(RA) accounts, where the depositors bear the currency risk, particularly when they anticipate future rupee appreciation.

By the end of August, total outstanding NRI deposits reached $153 billion, signifying not only the diaspora’s investment trust but also their role in remittance contributions. India remains the top recipient of global remittances, supporting families and fostering economic growth

NRE(RA) inflows tend to rise when investors expect the rupee to strengthen, enabling them to repatriate larger dollar amounts upon maturity of their deposits, typically spanning one to five years. The surge may also be due to India’s comparatively stable economic returns, with interest rates managed more conservatively than in many global economies, as highlighted in a June study by Bank of Baroda. The report indicates that domestic interest rates have been relatively less volatile than those of global central banks.

Moreover, the RBI’s latest monetary policy report shows that India was among the fastest-growing economies worldwide in the April-June quarter, with a real GDP growth rate of 6.7%, reflecting the economy’s resilience despite minor sequential slowdowns.

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