Overseas
Indians have started flocking India markets with a weak rupee and high
interest rates making them so attractive amid rising global
uncertainties following the downgrade of US sovereign debt rating as the
debt concerns in Europe that they have brought in highest ever amount
in a single month .
Aggregate inflows under various NRI deposits
schemes touched $ 1.7 billion in November, the highest ever in a single
month. The data reflects the period before the Reserve Bank freed up
interest rates in December, following which banks have raised the rates
sharply bringing them on par with local rates.
NRIs
have brought in a total of $ 6.4 billion so far this fiscal between
April and November, compared to a mere $ 2.2 billion in the year ago
period. However, a bulk of the inflows-$5.1 billion- have come in only
after August co-inciding with the deepening of the European debt crisis
and the US sovereign downgrade.
NRI deposits in India inflows are under three categories, foreign currency non-resident (banks) or FCNR
(B), non-resident -ordinary or NRO and non-resident external, rupee
account or NRE (RA). Each one of them have distinct features
.
For instance, in case of NRE (RA), the foreign exchange risk is borne
by the depositor and hence tends to gain at the time of conversion, when
the rupee is appreciating through the tenor of the deposits. While
these two are repatriable, proceeds in the NRO accounts are meant only
for the local use.
Besides, with the
prospects of rupee strengthening further, the returns on NRE deposits
could be even more attractive. Notably, it is the NRE deposits that has
been the favorite among the diaspora
with $ 3.4 billion coming in between August and November. ' NRIs often
tend to take a long-term view that the rupee would strengthen further
whenever the rupee has actually weakened. As a result, inflows tend to
be higher when rupee is weak.' said a senior official with a large
public sector bank requesting anonymity.
The Reserve Bank of India
sold a record $2.9 billion in the spot currency market to rein in the
value of the rupee, according to the figures released by the Reserve
Bank of India on Thursday.
The rupee,
it may be recalled was seen slipping against the dollar at a very steep
pace during the month, forcing the central bank to intervene in the
currency market to prevent a steep slide. The central bank has been
criticised from a section of the market for remaining on the sidelines
for very long.
After a prolonged
absence in the currency markets for almost a year, the central started
selling in small chunks in September and October. Cumulatively in three
months, it sold $ 4.7 billion between September and November'11.