NRE deposits on the rise despite political turmoil
Jayanthi Iyengar (ETonline)
NEW DELHI 8 SEPTEMBER
DESPITE the political instability, NRI deposits have been growing. But more so the outstandings in the non-resident (external) rupee account. The growth in this account is considered to be remarkable, particularly since its outstandings were expected to taper off after the removal of the exchange rate cushion by the RBI some time ago.
Current NRI deposit outstandings (the latest figures available are for May 1999) indicate that not only are NRI deposits neutral to the current political instability, but they are also growing, proving sceptics wrong. The growth in the NR(E)RA outstandings becomes all the more remarkable against this background. The current buoyancy in growth of NRI deposits is attributed to small remittances coming out of the Middle East. These remittances had fallen after the Iran-Iraq war, but have picked up during the last one year.
If one looks at the growth patterns of the outstandings of the three non-resident accounts, the story of NR(E)RA account is one of steady growth, while that of the Foreign Currency Non Resident (Bank) (FCNR(B)) account is one of a high rate of growth which has tapered off over time.
The government, on its part, prefers outstandings in the Non Resident (Non Repartiable) Rupee Deposits (NR(NR)RD), because though deposits are accepted in dollars here, the repayments can be made in rupees, since the balances in this account are not repatriable. Outstandings in this account too have been buoyant in the current period, leading to jubiliation within the government.
Outstanding positions in May indicate that the government's external liability to NRIs now stands at $21.419 billion, $118m higher than in March 1999.
Enthused by such a response, the RBI announced a special NRI deposit scheme meant for non-residents who voluntarily agree not to repatriate the principal and interest. This scheme came into force on April 15, though the response to it is yet to be documented.
The government has closely watched the NRI deposits after the debacle of the early 90s, during the BoP crisis.
Flight of capital at that time from the NRI deposits lead to the impression that unlike the Chinese diasporia, Indian non-residents were fair weather friends.
The developments since liberalisation have proved this wrong and the government is now coming to consider NRI deposits to be stable. |
