With total inflows into NRI deposits more than doubling, the Indian diaspora appears to be extremely bullish on the Indian economy.
According to the latest data released in the Reserve Bank of India’s latest monthly report, inflows into the NRI deposit scheme reached $7.8 billion in April-August this year, compared to $3.7 billion in the same period last year.
Dollar deposits (FCBR(B)) and rupee deposits (NRE(RA)) have surged, reflecting improved returns and strong fundamentals in the Indian market.
Of the $7.8 billion inflow in NRI deposits, $3.5 billion went into foreign currency non-resident (bank) deposits in FCNR (B). This is essentially a dollar deposit and the foreign exchange risk is borne by the bank accepting the deposit. On the other hand, $2.5 billion went to non-resident external (rupee account) deposits in NRE (RA), which are rupee deposits that bear exchange rate risks.
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Importantly, flows into NRE (RA) typically increase as investors in such deposits take home more dollars as the rupee appreciates in the future and depositors with maturities typically in the range of 1 to 5 years It is possible to predict that there will be a sudden increase. tenor.
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A possible explanation for this surge is that India’s revenues are more stable than in many other parts of the world. Bank of Baroda’s June survey found that “domestic central banks may be taking a more coordinated approach compared to global central banks, where interest rate rhetoric has been much more volatile.” the bank’s June survey said. Also, India’s economy is relatively strong compared to other countries. The central bank’s latest monetary policy report showed that India’s real GDP grew by 6.7% in the April-June quarter, making it the fastest growing economy, even though the country appeared to be slowing down thereafter. It is pointed out that. As of the end of August, the total NRI deposit balance reached $153 billion. In addition to NRI savings that can be sent back to the country of origin, Indian diaspora also sends back dollars to support their families. India is the largest recipient of diaspora remittances.
