India: Expatriate deposit inflows exceed $52 billion in six months - Sarmad

Inflows of funds from Indians abroad to India exceeded $52 billion in the first half of the year, prompting the central bank to end its foreign deposit attraction program ahead of schedule.

Data released by the Reserve Bank of India on Friday showed that Indian banks received deposits from non-resident Indians totaling $52.3 billion during the first six months of the year. Adding foreign currency loans and external commercial borrowings, total foreign currency inflows to Indian banks reached approximately $56.85 billion, according to Bloomberg.

The program for attracting deposits from Indians abroad was scheduled to run until September 30 next year, but the central bank decided to terminate the foreign currency deposit swap facility for non-resident deposits collected up to August 31 this year.

The central bank stated that the decision was made in light of the encouraging response to the non-resident currency swap deposit mechanism and the substantial foreign currency inflows generated by the program.

Gaura Sinha Gupta, chief analyst at IDFC First Bank, said the early termination of the program reflected stronger-than-expected demand, noting that total inflows under the program could reach around $70 billion.

The Reserve Bank of India launched the program in June to attract funds from the Indian diaspora, estimated at around 35 million people, by covering hedging costs against exchange rate volatility for banks collecting deposits from non-resident Indians, while allowing them to borrow against these funds.

Indian banks competed to attract these deposits, offering interest rates of up to 7.75% on five-year fixed deposits, in an effort to boost foreign currency inflows into the country.