The Hindu Business Line : Surging rupee likely to erode corpus of NRI deposits

THE sharp surge in the value of the rupee against the dollar in the last one-month is likely to lead to further erosion in the corpus of NRI deposits in the country, several bankers have said.

"The appreciating value of the rupee is neither happy tidings for the NRI nor for the Indian banker. The threat of income-tax, steep fall in interest rates and competition from overseas banking units have already resulted in an erosion of close to Rs 100 crore during the past several months from our NRI deposits. The surge in value of the rupee could force the NRI to further delay his remittances home," Mr A. Sethumadhavan, Chairman of South Indian Bank, said.

Ever since the liberalisation in the exchange rate regime began almost two decades ago, the value of the rupee had all along been heading south as against the dollar. This would be the first instance when the value of the rupee has consistently appreciated over such a long period of time, the bankers said.

While the high networth NRIs have several options and alternate avenues for investment, it is the middle and lower middle-income group NRIs who will be bearing the brunt of the appreciating value of the rupee.

With the plunging rates for NRI rupee accounts during the past few years, most of them had shifted to dollar accounts. Although temporarily, this had ensured better returns as long as the rupee registered a consistent fall against the dollar. But even that scenario has changed during the past one year.

With the growing real estate prices in the recent past, the ordinary NRIs have begun to look at real estate as an alternative investment avenue as against bank deposits, the bankers said.

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