NRE Deposits Hit 10-Year High On Rising Rates

Recently, RBI issued guidelines to deregulate interest rates on NRE (Non Resident Rupee) deposits, which made banks to raise their interest offering from around 3.8 percent to up to 9.5 percent. This rise in NRE deposit rates has brought some relief to NRIs and resulted in routing their savings substantially into NRE accounts.

In the month of January, the NRI fund flow into NRE deposits hit 10-year high of $1.56 billion. The total inflow for the Financial Year 2012 till January stood at $5.09 billion. It has been observed that this fund is the highest-ever inflow in the NRE deposits in a FY 2003, when the net inflow stood at $6.19 billion.

Also, in January, the rupee was trading at over 50 against dollar. This is the major reason which pushed investors to route their investment into rupee accounts and take the advantage. Thus, RBI’s move on deregulation of interest rates has worked well and it has provided stability to rupee and has also improved liquidity in the system. Moreover, the fund inflows in the month of February and March are still strong.

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