Continuing rupee fall and higher interest rate have seen NRI deposits nearly doubling in the first eight months of 2012-13 to USD 11.24 billion from USD 6.39 billion a year ago, according to the Reserve Bank data.
However, the non-resident (ordinary) rupee accounts and foreign currency non-resident accounts saw an outflow this year as against an inflow last year, according to the central bank data.
It can be noted that the rupee had hit an all-time low of 57.32 to the dollar on June 14. However, last Friday, the rupee ended at 54.76 to the dollar, which is 4.67 per cent stronger from its all-time low.
Even though the currency has appreciated from its all-time low, inflows into NRI deposits continue on the back of higher interest rates.
It can be noted that, following the rupee fall in December 2011, the RBI had deregulated interest rates on NRI deposits, forcing banks to hike rates of such deposits sharply, which now hover over 10 per cent, while banks were lowering rates for domestic deposits.
Following the steep fall in the rupee, which began with the downgrade of the US rating by S&P in August 2011, in November, the RBI had raised maximum interest rates on NRE accounts for one-year-plus to Libor plus 275 bps.
This deregulation resulted in a surge in inflows in the January-May period of 2012. But, inflows started ebbing out and November 2012 saw the lowest inflow in nine months.
The RBI again hiked the cap on FCNR interest rates, raising it to 200 bps above the Libor for one-three-year deposits and 300 bps for deposits in the three-five year bucket.