NRIs rush to capitalise on interest rate advantage
Between December'16 and February'17, NRIs invested $4 billion in rupee deposits called non-resident external (rupee accounts) or NRE (RA) deposits, RBI data showed.
By Gayatri Nayak, ET Bureau | Updated:
Mumbai: The recent rally in the rupee is good news for non-resident Indians ( NRI) set to gain from the interest rate advantage.NRI deposits have surged since to the highest quarterly inflows since April'15 after the rupee touched a low of over Rs 68 to the dollar in December'16.
Between December'16 and February'17, NRIs invested $4 billion in rupee deposits called non-resident external (rupee accounts) or NRE (RA) deposits, RBI data showed. This is the highest quarterly inflows through this scheme since April'15. Of this, $2.3 billion in deposits were contracted in December itself.
“Whenever the rupee weakens sharply against the dollar, NRIs convert their dollars into rupee if they think rupee is going to strengthen further. This is similar to the way exporters also behave,“ said Venkat Nageswar, deputy managing director in charge of treasury at SBI. “One can corroborate? The huge inflows NRE deposits in December with the sharp depreciation of the rupee in the month.“
NRE deposits which have to be a minimum of one year tenor would earn a minimum of 6 to 7% return. In addition, the depositor also benefits out of currency appreciation. The rupee has already gained about 5% since January and by an even higher margin since December.
Though banks charge a penalty for premature withdrawal, NRIs still stand to gain significantly as the penalty ranges from 0.5 to 1% on an average.
Between December'16 and February'17, NRIs invested $4 billion in rupee deposits called non-resident external (rupee accounts) or NRE (RA) deposits, RBI data showed. This is the highest quarterly inflows through this scheme since April'15. Of this, $2.3 billion in deposits were contracted in December itself.
“Whenever the rupee weakens sharply against the dollar, NRIs convert their dollars into rupee if they think rupee is going to strengthen further. This is similar to the way exporters also behave,“ said Venkat Nageswar, deputy managing director in charge of treasury at SBI. “One can corroborate? The huge inflows NRE deposits in December with the sharp depreciation of the rupee in the month.“
NRE deposits which have to be a minimum of one year tenor would earn a minimum of 6 to 7% return. In addition, the depositor also benefits out of currency appreciation. The rupee has already gained about 5% since January and by an even higher margin since December.
Though banks charge a penalty for premature withdrawal, NRIs still stand to gain significantly as the penalty ranges from 0.5 to 1% on an average.
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