Rupee's loss adds to SBI's gains in NRI deposits

Saikat Das
Moneycontrol.com

India's largest lender - the State Bank of India (SBI) has successfully managed to drive rupee's slide (against the US dollar) to its own favour. The bank's deposit base for non-resident Indians (NRIs) expanded by a robust Rs 7,000 crore to around Rs 70, 200 crore so far in 2012-13. Encouraged by the response, it now plans to mobilise Rs 16,000 crore of such deposits as against Rs 12,000 crore targeted earlier for the current year.

"The rupee depreciation has really acted in our favour. This has attracted many NRIs to put money in our deposit schemes. Rupee dominated NRI deposits has particularly become very popular segment over foreign currency non-resident deposits (FCNR).  It is a win-win situation for us and RBI as well," a senior official from SBI told Moneycontrol.com on condition of anonymity.

NRI deposits are of two types: Rupee deposits wherein a customer directly subscribes a scheme in rupee terms; and FCNR in which a depositor puts money in a foreign currency. The Indian rupee tumbled around 11.50% against the USD since the beginning of the financial year. A depreciated rupee is advantageous for NRI depositors.  

NRI rupee deposits has the majority share in SBI's total mobilization of Rs 7,000 crore while FCNR contributed around Rs 500 crore so far in FY13. With hike in FCNR rates, according to the SBI official, this segment too is likely to rise. Earlier, NRIs were converting their FCNR schemes to rupee deposits. That trend has stopped to a great extent after the latest RBI's notification.

In May, SBI increased NRI deposit rates by 75-175 bps. For a tenure of 1-2 years, it is now offering 3.07% per annum in US dollar (inclusive of LIBOR), 3.23% in Euro and 3.84% in pound sterling. For less than Rs 15 lakh term deposits with tenure of 1-3 years, the lender is offering 9% p.a.

Recently, the Reserve Bank of India (RBI) eased norms of NRI deposits to attract more foreign funds. This in turn, would help resist rupee’s free falling against the greenback. It hiked the rate of foreign currency deposits for non-resident Indians by 75-175 basis points to 200 bps for maturity period of one year to less than 3 years and to 300 bps for maturity period of 3-5 years.

For example, Indian banks can offer at the rate of LIBOR (London Interbank Offered Rate, currently at around 1.05%) plus 200 bps for the first maturity bracket. Earlier, RBI had deregulated NRI rupee deposits in December, 2011.

SBI is currently running a special campaign to ramp up NRI deposits for June-July.

saikat.das@network18online.com