The confidence of non-resident Indians in the Indian economy seems to be reviving again. After an outflow of $ 2 billion in 2008-09, NRI deposits have increased by nearly $3.7 billion in the first four months of 2009-10 despite the volatile movements in the interest rates.

According to the RBI, total NRI deposits had declined to $41.55 billion by end of March 2009 from $ 43.60 billion in April 2008. However, NRI fund inflows increased since April 2009 and touched $ 45.33 billion till July 2009, as per the RBI's September bulletin. Most of the NRI comes through the Foreign Currency Non-resident (FCNR) account and Non-resident External Rupee Accounts. As of July 2009, FCNR deposits accounts for $ 14.16 billion ($ 13.21 billion in March 2009) and $ 25.22 billion ($ 23.57 billion in March) in the NR(E)RA. Deposits under the NRO (Non-resident Ordinary) account were also higher at $ 5.9 billion ($ 4.7 billion). As interest rates on both FCNR and NR(E)RA are linked to the Libor (London Inter Bank Rate), Indian banks find NRI deposits quite cheap when compared to local deposits. Most of the NRI deposits which are flowing to South-based banks come from the Middle East.

“The flow of NRI money clearly shows that there was no decline in NRI remittances from abroad. It makes sense for NRIs to deposit in India as they get higher returns here. Unlike some foreign banks which faced trouble, Indian banks showed their strength and proved they are safer,” said a banking source.