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Cap chokes NRE deposits

Mumbai, Nov. 16 (PTI): Banksí NRE deposits dropped for the second straight month to August after the Reserve Bank of India capped the interest rates on them.

According to data in RBIís monthly bulletin for November, inflows into non-resident (external) rupee accounts stood at $ 793 million in June but declined to $ 495 million in July and slowed down to $ 306 million in August. These deposits had seen inflows of $ 626 million in May. The interest rates on the fresh NRE deposits for one to three years were capped at 2.50 per cent above Libor on July 17,, to one per cent above Libor on September 15 and 0.25 per cent on October 18.

Meanwhile, State Bank of India is likely to close the two special NRI deposit schemes it launched to retain Resurgent India Bonds (RIBs) by the end of this month.

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