Foreign Currency Non-Resident (Bank) Deposits
The United Arab Emirates (UAE) and the United States (US) play a significant role in the FCNR (B) deposits mobilized by Indian banks, indicating a strong Indian banking presence in the Gulf region.
Key Statistics
- As of September 2024, the UAE accounted for 43% of the FCNR (B) deposits, up from 39% in March 2020.
- The share of the US decreased from 17% to 10.6% during the same period.
Reasons for UAE's Higher Share
Soumitra Sen, country head of consumer banking at IndusInd Bank, explains that Indian banks have a higher presence in the GCC, particularly the UAE, through representative offices and offshore branches, leading to a greater share of non-resident FCNR deposits from these regions.
Comparison with Other Countries
- The UK holds a 5.5% share of FCNR (B) deposits.
- Singapore accounts for 5%.
Lower US Share Explanation
Higher interest rates and bond yields in the US provide NRIs with more lucrative investment opportunities, reducing the appeal of FCNR (B) deposits.
GCC-based NRI Client Preferences
- NRIs see safety and higher returns in India compared to their country of residence.
- FCNR inflows grew faster due to the strength of the Indian economy and banking sector.
Nature of NRI Deposits
Unlike remittances for family maintenance or non-repatriable transfers, NRI deposits serve as savings and investment instruments and are repatriable.
RBI's Strategic Move
The Reserve Bank of India recently relaxed interest caps on FCNR (B) deposits, aiming for long-term growth rather than immediate impacts amidst volatile markets.