The banks in Kerala witnessed a sharp increase in Non-Resident Indian (NRI) deposits with the Reserve Bank of India (RBI) reducing CRR rates and due to depreciation of rupee.
In the last quarter which ended in June 2012, there was a growth of 44 per cent which was steadily increasing. But, the domestic deposits showed a negative growth from June 2011 itself.
According to Federal Bank general manager Jagadeeshan, the deposits increased as the banks hiked the interest rate on a par with the domestic deposits.
Earlier, the interest rate for NRIs was around 2.5 to 3 per cent. “The interest rate has now increased to 8.75 per cent which is much higher when compared to banks in foreign countries. This resulted in NRIs withdrawing their money from foreign banks and depositing in Kerala,” he said. Rupee’s depreciation is another reason for the high deposits. When NRI deposits increase, the domestic deposit automatically comes down, he said.
There were instances when the NRIs deposited money in the name of relatives to get a higher interest, when the interest rate for NRI deposits were low. Now there is no such trend as NRI deposits are tax free. Those investing in real estate here are also on the decline as the speculation on land prices have stopped. Now the genuine buyers are investing in land and NRIs have stopped investing in land for higher gains.
The NRI deposits had registered an increase of Rs 7,209 crore from March, 2012. It stood at Rs 55,663 crore in June which was 44 per cent more than the previous year. Canara Bank assistant general manager P Anil Kumar said that the domestic depositors were now going for investment and this led to a negative growth.
In June 2011, 76.87 per cent of the total deposits were from domestic account holders, which came down to 73.43 per cent and this trend started from June 2011. A tremendous growth of NRI deposits are seen from semi urban areas which is 64.79 per cent of the total deposits. The urban areas account for only 5.75 per cent. According to Jagadeeshan, the higher NRI deposits resulted in the credit deposit ratio declining to 301 basis points reaching 72.56 per cent in June this year.