Swap carrot, weak rupee pull in record forex from NRIs in Sept

Deposit flows cross $10-billion mark; flow highest in NRE deposits at $4.87 bn

Responding positively to the Reserve Bank of India's (RBI) efforts at attracting foreign exchange, non-resident Indians (NRIs) deposited as much as $10.12 billion in the month of September alone.

According to bankers, the swap facility for Foreign Currency Non-Resident (Bank), or FCNR(B), deposits, attracted money from overseas Indians. Also, the weak rupee combined with attractive rates on non-resident external (NRE) deposits helped get funds.

According to RBI data, NRI deposits swelled to $77.99 billion in September. The central bank sold net $3.54 billion in September (it sold $6.9 billion and bought $3.36 billion).

K R Kamath, chairman and managing director of Punjab National Bank, said that inflows of funds from NRIs rose in September. The flows in October were substantial, he added.

According to RBI data, all the three categories of NRI deposits - FCNR (B), NRE and non-resident ordinary (NRO) - saw net inflows in September. The flow was highest in NRE deposits at $4.87 billion, followed by $4.1 billion in FCNR(B) deposits in the reporting month.

Through August and September, RBI had taken many steps to attract NRI deposits to generate foreign exchange, which in turn could help arrest the rupee fall. In August, the central bank allowed banks to offer interest rate without any ceiling on NRE deposits with maturities of three years and above. Banks would not have to maintain cash reserve ratio (CRR) or statutory liquidity ratio (SLR) for any incremental NRE and FCNR (B) accounts.

RBI also raised the interest ceiling for FCNR (B) deposits for three- to five-year maturities by 100 basis points (bps) to Libor-plus 400 bps.

On September 4, RBI decided to offer banks a window to swap fresh FCNR (B) dollar funds. This was to boost sentiment in the foreign exchange market and attract dollar flows. These are mobilised for a minimum tenor of three years.