The Indian diaspora’s safe haven deposits in Indian banks plunged 62 per cent in the first eight months of the fiscal year as returns shrank in a falling interest. The latest data from the Reserve Bank of India indicated a grim picture of NRI Investment.
According to the RBI data, the net inflows to various NRI deposit schemes plunged to $2.6 billion during April-November this year, from $ 7 billion in the same period a year ago.
Non-resident external (NRE) accounts, which are regarded as the Indian diaspora’s safe heaven deposits, hold 72 per cent of NRI deposits. NRE accounts, which normally fetch high returns, fell 62% in the first eight months of the fiscal year, unlike previous years as interest fell and the risk-reward ratio took an adverse turn.
“With falling returns, there has been a general slowdown in term deposits as an investment avenue,” said Ashutosh Khajuria, executive director, Federal Bank, while speaking to the Economic Times.
“Other alternatives avenues like mutual funds and stocks were more attractive for the NRI,” Ashutosh said.
Domestic deposits, however, increased 5.5 per cent in Indian banks from April to November last year compared to 7.5% in the same period a year earlier. The rise in the increase would be because of the pandemic-induced lockdown in 2020-2021 that had prompted depositors to seek refuge in safety rather than in risky ventures.
While, the pandemic hit the lively hood of many NRIs; many lost jobs, especially in the Middle East, resulting in lesser surplus and consequently lesser deposits.
People had to fend for daily life rather than long-term investments and this was evident from the non-resident ordinary (NRO) deposits. NRO deposits which are meant for daily expenditure and not for investment doubled to $2 billion during this period.
“The Indian diaspora had to deal with a lot of disruptions,” said Khajuria. “Money parked in NRI deposits are essentially savings after taking care of the maintenance of family”.
