Non-resident Indians (NRI) stepped up their deposits in India in November, data released by the Reserve Bank of India showed.
Outstanding NRI deposits stood at $125.68 billion in November, from $121.53 billion in October — a rise of $4.15 billion. Majority of the rise in deposits was in the non-resident external rupee account, rising $4.94 billion in the month, according to RBI’s January bulletin. The data comes with a two month lag in RBI bulletins.
In this account, dollars are converted into rupees and deposited. While the interest rate offered is at par with domestic deposit rates, the main attraction is always the volatility in exchange rates.
The rupee hit its lifetime low of 74.39 a dollar on September 10, but started strengthening thereafter. The rupee ended November at 69.58 a dollar. The rise in deposits may indicate that NRIs expect the rupee to appreciate here on, given a stronger rupee improves the return on investment, when converted into dollar.
However, if the rupee depreciates against the dollar from the level it was invested at, depositors lose out on exchange rate.
Consequently, foreign currency non-resident deposits, in which dollars are deposited, fell by about $1.73 billion, according to the bulletin.