NRI deposits swell in Gujarat as rupee continues to slide

At 10.5%, the annual growth in NRI deposits is highest in last four years

Sustained fall in rupee during the last fiscal 2012 has boosted non-resident Indian deposits with banks in Gujarat. As per the data released by Gujarat state level bankers' committee (SLBC) on Thursday, the NRI deposits with banks in Gujarat has increased by over 10.5 per cent to Rs 25,400 crores as on March 2012 against Rs 22,976 crore as on March 31, 2011. The growth in NRI deposits during the year is the highest in past four years.

"The growth in NRI deposits is mainly on account of the continued fall in rupee against dollar. The Indian currency has lost over 14 per cent during the financial year, prompting overseas Indian residents to put in their dollars as bank deposits thereby reaping higher returns in rupee terms," said an SLBC official.

During the financial year 2011-12, rupee has fallen from Rs 44.42 for a US dollar in April 2011 to Rs 50.88 in March 2012, down by over 14.5 per cent during the fiscal. On January 2, 2012, Indian currency touched Rs 53.31 a dollar - lowest level against the US greenback during the fiscal.

An analysis of the historical data showed that the growth in NRI deposits with banks in Gujarat has been the highest since the global slowdown in 2008. The NRI deposits had growth by about 8.7 per cent between March 2008 to March 2009. The growth had slowed down during 2010 and 2011, showing a paltry annual growth of 4.4 per cent and 3.56 per cent in the NRI deposits with banks.

"Mostly all the banks had increased their interest rates on NRI deposits as we desperately needed dollars to keep rupee value high. This shows that our banks have succeeded in attracting increased NRI funds," said Kulin Vyas, a chartered accountant and former chairman of banking committee at Gujarat Chamber of Commerce and Industries (GCCI).

In December 2011, the Reserve Bank of India (RBI) had deregulated rates on Non Resident External (NRE) deposits (which are maintained in rupees).

Most banks increased interest rates on NRE deposits from about 3 per cent per annum to nearly 9 per cent.

According to industry insiders, NRI deposits had started falling during the global slowdown, especially during 2009-10 and 2010-11.

"The growth in NRI deposits had slowed during 2010 and 2011 mainly due to weakness in overseas economies including US, Europe and Middle East. However, since the beginning of the fiscal 2012, there were positive signs coming from the US economy and also things started settling down in Middle East and also in South East Asia," informed a public sector bank official.

Experts also maintained that NRI deposits grew faster during the second half of the financial year, when rupee fall against dollar was more severe. The rupee has lost value by about 22 per cent against the US dollar since August, 2011. Since October 2011, the rupee had witnessed sharp value erosion against the US dollar as it hovered above Rs 50 a dollar during most of the period.

The report further mentioned that the aggregate deposits of the banks in Gujarat increased by Rs 45,188 crores in absolute terms or 16 per cent from Rs 272,076 crore as of March 31, 2011 to Rs 317,264 crore as of March 31, 2012.