Indian Banks Flush With NRI Deposits


By Aparna Ramalingam

With the rupee trading above Rs 50 against the dollar, remittances from non-resident Indians are surging.

CHENNAI – 0 With the rupee trading above Rs 50 against the dollar, remittances from non-resident Indians are surging. In October, the local currency was trading at around Rs 45. Banks like Kotak Mahindra Bank is witnessing a 40-50% y-o-y growth in remittances, while other smaller banks are seeing their NRI deposits growing by 10-30%. The spike in remittances is also partially attributed to the financial crisis in Europe and political unrest in West Asia.

With the rupee breaching the 50-mark, deposits in dollar accounts such as foreign currency non resident account bank schemes (FCNR) (B) have earned an annualized 40% return. To make it sweeter, such accounts can now be held in freely convertible currency. Currently, currencies designated by the Reserve Bank include dollar, pound sterling, yen, euro, Canadian dollar and Australian dollar.

Kerala-based banks have been the biggest beneficiaries of the remittance windfall. Nearly 21% of the deposit base of Federal Bank is accounted by NRIs. For the second quarter, the bank has seen a 30% growth in NRE (non resident external rupee account) and FCNR accounts. “Nearly 7% of pan Indian remittances come through our bank and the rupee weakening has given a further boost,” says A Surendran, head, international banking, Federal Bank. The bank is expecting a 30% growth in its non resident business this fiscal.

Similarly, the non-resident deposit business of South Indian Bank has grown by 20% for the half year ended September 2011. To top that, many Indian banks had offered a 9% deposit schemes at the beginning of the year and with NRO (non resident ordinary rupee account) rates pegged to domestic rates, banks saw a heavy flows into such accounts. For instance, Tamil Nadu’s Karur Vysya Bank has seen a 12% growth in its NRO deposits quarter-on-quarter this fiscal. “NRIs are resorting to arbitrage on account of a weaker rupee and better interest rates on deposits in India when compared to banks abroad,” says N Venkataraman, managing director and chief executive officer, Karur Vysya Bank.

Importantly, the role of NRIs in the Indian banking system has widened. “They are looking at multiple benefits and not just windfalls from exchange rate fluctuations. This includes opportunities for investment in real estate and mutual funds,” says Praveen Kutty, head, retail and SME banking, Development Credit Bank. DCB has seen a growth of 20% in non-resident deposits q-o-q this fiscal and nearly 10% of the retail deposit base of the bank is accounted by Indians abroad. To cash in on such investment opportunities, South Indian Bank has launched portfolio management services for NRIs in association with Geojit BNP Paribas.

“Unlike the previous generation, many of the present generation living abroad are looking to return to India at some point. They are making investments in apartments and so nearly 50-60% of their savings gets channelized to India,” says N Kamakodi, chairman and managing director, City Union Bank.

It’s also profitable to have NRI customers as the average balance maintained by such customers in savings bank and term deposits is much higher than their domestic counterparts. While average balances in CASA of Indian account holders are Rs 35,000, NRIs tend to park over Rs 1 lakh in NRO and NRE savings accounts.

Courtesy TNN

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