Stocks, bonds take sheen out of NRI scheme as deposit inflows decline 53.3%
NRE deposits have dipped 46% from $9.4 billion to $ 5.1billion even as returns are on par with local deposits and tax free.
By Gayatri Nayak, ET Bureau | Updated:
MUMBAI: Non-resident Indian (NRI) deposits continue to lose their sheen among expatriates as other avenues such as stocks and bonds have turned more attractive. Inflows through various NRI deposit schemes -including foreign currency non-resident (banks), or FCNR(B), non-resident external (NRE) and non-resident ordinary (NRO) accounts -have halved in the first six months of the current fiscal.
Total NRI deposit inflows fell 53.3% to $6.4 billion in AprilSeptember from $13.7 billion in the year-ago period.
“With a stable and proactive government at the centre, avenues like stocks, bonds and other debt products have become more attractive for NRIs,“ said KN Dey, senior advisor with Mecklai with Mecklai Financial Services, a foreign exchange advisory firm.
Stock market returns have gone up 17% since the Narendra Modi government took charge in May . A bond issued by a top rated company maturing in two to five years earns about 9%.“Many non-resident Indians are also investing in second-tier companies where yields are even higher,“ said Dey .
Sentiment turned unfavourable overall after the US Federal Reserve signalled an end to the easy money policy. Besides, commercial banks aren't marketing these deposits aggressively as the incentives offered by the Reserve Bank of India on FCNR(B) deposits, to attract foreign currency flows and strengthen the rupee, have ended.
These sops ensured higher returns for the banks as the inflows were swapped by the central bank at attractive rates.“We are not pushing NRI deposits as we are flush with funds.Besides, the demand for funds has also not picked up,“ said a senior State Bank of India official. FCNR(B) deposits have dipped 74% from $4 billion to $1 billion during the period.
NRE deposits have dipped 46% from $9.4 billion to $ 5.1billion even as returns are on par with local deposits and tax free.
In addition, the depositor also benefits when the dollar weakens as the foreign exchange risk is borne by the depositor.
Total NRI deposit inflows fell 53.3% to $6.4 billion in AprilSeptember from $13.7 billion in the year-ago period.
“With a stable and proactive government at the centre, avenues like stocks, bonds and other debt products have become more attractive for NRIs,“ said KN Dey, senior advisor with Mecklai with Mecklai Financial Services, a foreign exchange advisory firm.
Stock market returns have gone up 17% since the Narendra Modi government took charge in May . A bond issued by a top rated company maturing in two to five years earns about 9%.“Many non-resident Indians are also investing in second-tier companies where yields are even higher,“ said Dey .
Sentiment turned unfavourable overall after the US Federal Reserve signalled an end to the easy money policy. Besides, commercial banks aren't marketing these deposits aggressively as the incentives offered by the Reserve Bank of India on FCNR(B) deposits, to attract foreign currency flows and strengthen the rupee, have ended.
These sops ensured higher returns for the banks as the inflows were swapped by the central bank at attractive rates.“We are not pushing NRI deposits as we are flush with funds.Besides, the demand for funds has also not picked up,“ said a senior State Bank of India official. FCNR(B) deposits have dipped 74% from $4 billion to $1 billion during the period.
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NRE deposits have dipped 46% from $9.4 billion to $ 5.1billion even as returns are on par with local deposits and tax free.
In addition, the depositor also benefits when the dollar weakens as the foreign exchange risk is borne by the depositor.
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