Lured by higher returns offered by banks in their homeland - India, non-resident Indians (NRIs) placed deposits aggregating $1,418 crore in the financial year ended March 2013, an increase of 19% over the previous year.
In the previous year (2011-12), NRIs parked deposits aggregating $1,192 croren with banks in India. NRIs placed deposits predominantly in non-resident (external) rupee account or NRE account.
NRE deposits with the banking system jumped 85%(rising by $1,581 crore in 2012-13 compared to $ 853 crore in 2011-12, according to Reserve Bank of India (RBI) data.
The attractiveness of NRE deposits lies in the fact that banks quote the same interest rate on these as on domestic deposits. For example, State Bank of India (SBI)is quoting 8.75% on NRE deposits of 1 to 10 year duration. Also, the principal & interest are fully repatriable and the interest earned is exempt from Indian income tax.
In FY13, the banking systems NRO (non-resident ordinary deposits) shrunk by $180 crore (against an accretion of $ 400 crore). Since NRO deposits are non-repatriable and require submission of tax-residency certificate & self-declaration, bankers say these deposits have become unattractive.
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