Flows into NRI deposits surge in April-Sept, but outstanding amount falling

The flow of money into non-resident Indian (NRI) deposits improved to $2.78 billion in April-September this year, over $1.74 billion in April-September 2021, showing the effect of sops like easing limits on interest rate.

However, the streak of decline in outstanding NRI deposits continued in the six months of 2022-23. They fell to $133.6 billion in September, from $139 billion in March and $141.55 billion a year ago. They also shrunk from $134.68 billion in August, revealed the Reserve Bank of India (RBI) data.

State Bank of India Chairman Dinesh Khara told Business Standard while flows into deposits have increased, some funds (from deposits) have been used for purchases during the festival season — one of the reasons for the dip in outstanding deposits.

In July, the RBI took steps to enhance fresh inflows into NRI deposit accounts. These sops were the easing of cap on interest rate on Foreign Currency Non-Resident (Bank), or FCNR(B), and Non-Resident External (NRE) deposits, and exemption from maintaining cash reserve ratio and statutory liquidity ratio on incremental deposits until November 4.

The RBI in its state of the economy report said that subsequent to the policy measures, net flows into non-resident deposit accounts have picked up at an aggregate level during the second quarter.  The outlook for NRI deposit flows will be conditioned by factors like the magnitude of expected slowdown in advanced economies. The pace and timing of further interest rate actions will also have a bearing on flows, added the report. The outflow of FCNR deposits was $940 million in April-September, less than the outflow of $1.5 billion in April-September 2021.

A further analysis indicated outstanding FCNR(B) deposits were at $15.97 billion in September 2002, down sequentially from $16.01 billion in August and $18.95 billion a year ago.

FCNR(B) deposits were at $16.91 billion in March.  The US dollar continued to be the key currency of FCNR(B) deposits, with its share at around 75 per cent, followed by the Japanese yen and pound sterling at around 20 per cent. NRE deposits were at $95.79 billion in September 2002, down sequentially from $96.95 billion in August and $102.74 billion a year ago. 

NRE deposits were at $100.8 billion in March.