Overseas Indians are setting great store by the safety and returns offered by Indian banks on NRI deposits. Proof: In the first nine months of FY2010, they parked $1.34 billion more in these deposits over the corresponding period last year. In the first nine months of FY2010, inflows into non-resident Indian (NRI) deposits were 64 per cent higher at $3.474 billion as compared to $2.114 billion in the corresponding year-ago period.
Given that many Western economies were singed in the recent global financial crisis, NRIs were increasingly parking their surplus with Indian banks in order to save up for a rainy day and also to earn a higher interest rate, said bankers. According to the Balance of Payments data released by the Reserve Bank of India, in the first nine months of FY2010, private transfer receipts, comprising mainly remittances from Indians working overseas, increased to $40.8 billion from $37.1 billion in the corresponding period last year.
Inward remittances for family maintenance accounted for about 52.7 per cent of the total private transfer receipts. Net inflows on account of external commercial borrowings (ECB) in the reporting nine-month period slowed to $2.3 billion mainly due to increased repayments and low disbursements of commercial loans to India. In the corresponding nine-month period last year, net ECB inflows were higher at $6.9 billion. Foreign investments, comprising foreign direct investment (FDI) and portfolio investments, in the reporting period shot up by a whopping 1, 249 per cent to $40. 134 billion (it was $2. 975 billion in the corresponding nine months last year).
A break-up of foreign investments in the first nine months shows that inflows on account of FDI stood at $16.5 billion ($14. 3 billion) and portfolio investments, which includes foreign institutional investments, $23.6 billion (as against outflows of $11.3 billion). Short-term trade credit jumped by 289 per cent to $2.665 billion as against $685 million in the corresponding period last year. Despite a lower trade deficit at $89.5 billion ($98. 4 billion), India's current account deficit in the reporting period was higher at $30.3 billion ($27. 5 billion) due to lower invisible surplus.
The invisible surplus was lower at $59.2 billion ($70. 9 billion) due to decline in invisible receipts arising from business, communication and financial services, and investment income receipts. The surplus in the capital account increased sharply to $43.2 billion ($5. 8 billion) mainly on account of large inflows under FDI, portfolio investment, NRI deposits and commercial loans.