Deposits in NRI accounts slow down to $1.43 billion in April-August period

18 Oct 2022 , 09:38 AM

In April—August 2022, the amount of money going into non—resident Indian (NRI) deposits decreased from $2.44 billion in April—August 2021 to $1.43 billion. At the end of August 2022, outstanding NRI deposits were down from $141.52 billion to $134.68 billion. NRI deposits also decreased over time, from $139.02 billion in March 2022 to 135.39 million in July 2022, according to data from the Reserve Bank of India (RBI).

From $19.33 billion in August 2021 to $16.01 billion in August 2022, money going into Foreign Currency Non-Resident (FCNR) deposits decreased. In March 2022, FCNR-B deposits were $16.91 billion, while in July 2022, they were $15.87 billion. According to bankers, the Reserve Bank of India’s loosening of the interest rate cap was responsible for the slight increase on a sequential basis over July 2022. This was done to encourage more money to be deposited by NRIs.

A decrease in outstanding deposits was also observed in the second category, the Non-Resident External Account (NRE), where NRIs can transfer their foreign profits, from $102.6 billion in August 2021 to $96.95 billion in August 2022. In March 2022, there were $100.8 billion in NRE deposits, while in August 2022, there were $97.92 billion.

In contrast, the trend for Non-Resident Ordinary (NRO) Accounts was quite the opposite, with outstanding deposits increasing from $ 19.52 billion in August 2021 to $21.71 billion in August 2022. They remained consistent throughout time, reaching $21.3 billion in March and $21.59 billion in July 2022.

The RBI adopted numerous actions to increase forex inflows on July 7, 2022, in response to the steep decline in foreign exchange reserves. The RBI made the decision to temporarily waive any reference to current interest rate regulations in order to allow banks to raise new FCNR(B) and NRE deposits. Up until October 31, 2022, this relaxation will be available.

The Overnight Alternative Reference Rate (ARR) for the relevant currency/swap plus 250 basis points for one year to less than three-year maturities is the maximum interest rate that can be charged on FCNR-B deposits prior to relaxation. The cap for FCNR-B deposits is overnight ARR plus 350 basis points for deposits lasting three years and up to five years.

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