Recent data from the Reserve Bank of India reveals a significant uptick in money inflows from Indians abroad. Between April and December 2024, NRI deposits climbed by an impressive 42.8% compared to the same period last year, reaching a total of $13.33 billion, up from $9.33 billion in 2023. This surge is contributing to a rising trend in foreign currency reserves, with the total outstanding NRI deposits now standing at $161.8 billion by the end of December 2024, a notable increase from $146.9 billion recorded in December 2023.
The highest gains were observed in FCNR(B) deposits, which allow non-resident Indians to hold fixed deposits in freely convertible foreign currencies for up to five years, thereby safeguarding their funds against currency fluctuations. During the period under review, FCNR(B) deposits saw inflows of $6.46 billion, almost doubling the $3.45 billion recorded during the same period in the previous year. Moreover, outstanding FCNR deposits reached $32.19 billion by the end of 2024, underscoring the growing confidence among NRIs in the stability and potential returns offered by these accounts.
In addition to FCNR(B) deposits, other categories such as NRE deposits also experienced healthy growth. Inflows for NRE accounts increased to $3.57 billion from $2.91 billion year-on-year, with outstanding balances totaling $99.56 billion as of December 2024. Similarly, NRO deposits contributed $3.29 billion, bringing the total outstanding NRO deposits to $30.04 billion. These numbers highlight the diverse ways in which NRIs are engaging with the Indian financial system, thereby reinforcing the nation’s external liquidity position.
In a strategic move to attract even more foreign currency inflows, the RBI has raised the interest rate ceiling on FCNR(B) deposits. This policy adjustment is designed to offer higher returns to depositors, thereby incentivizing more NRIs to invest their funds in India. By doing so, the central bank also aims to support the rupee against the US dollar, mitigating the risks posed by external currency fluctuations.
The robust growth in NRI deposits not only reflects the trust NRIs have in India's financial system but also signals a broader trend of strengthening foreign exchange reserves. As more Indians abroad choose to invest their earnings back home, the positive impact on the economy is twofold: enhanced liquidity for domestic financial institutions and a stronger buffer against global currency volatility.
This influx of foreign capital is expected to have a long-term positive effect on India's financial stability. As the RBI continues to adopt measures that make Indian deposit schemes more attractive, such as the recent interest rate adjustments, the overall environment becomes increasingly conducive to sustained economic growth. For NRIs, these developments offer a promising avenue to secure their investments while contributing to the nation's economic resilience.
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Economy