NRI Alert: Why your money in India will not earn you more cash
Non-resident Indians (NRIs) in the UAE who have been ardently parking their remittances in non-resident external (NRE) fixed deposits (FDs), take note.
Indian banks have started to lower interest rates on FDs, which about a couple of years bank were as high as 10 per cent. Now, rates have trickled down with state and private banks offering between 8 and 8.5 per cent.
Kotak Mahindra is currently giving 8.5 per cent for two year FDs, while ICICI Bank is offering 8 per cent for one year to 389 days and 8.5 per cent for 390 days to up to 10 years. State Bank of India is giving between 8 and 8.25 per cent for tenures of one to 10 years.
In 2013, we reported that HDFC Bank was offering NRIs guaranteed returns of 13 to 14 per cent on fixed deposits.
Read: NRI alert: 14% tax-free return on fixed deposits
A number of Indian banks have been ringing their NRI clients to remit money and advising them to invest in long-term FDs.
“I got a call a number of calls from Indian banks that ask me to remit money as the currency rate is favorable and thereafter advising me to make FDs as they expect interest rates to come down further,” Amit Shah, a Dubai resident, told ‘Emirates 24|7’.
Mahi Sen, who works in a local real estate company, says: “I have been contacted by my Indian bank who believe that rates are expected to come down further suggesting booking five year FDs.”
Indian rupee is currently fetching Rs17.47 to a UAE dirham on Thursday morning at 7.50 am UAE time.
On Tuesday, the Reserve Bank of India cut interest rates by 25 basis points (bps) for the third time this year, citing weakness in growth, but indicated limited room for future rate cuts due upside risks to inflation.
Governor Raghuram Rajan told a press conference that deposit rates had fallen by 100 bps with Live Mint newspaper stating deposits were now offering returns that were lower than what small saving schemes offered.
“FD rates have already fallen. We may see a further reduction of 25 bps depending on the bank’s cost of funds. As of now, pre-tax return of debt funds is similar to bank FDs’. Those looking to lock money for the long term in a fixed instrument should go for debt funds instead of bank FDs,” the newspaper quoted Anil Rego, a Bengaluru-based financial planner, as saying.
In 2013, JLL, a real estate consultancy, had indicated that capital appreciation on real estate in India is far higher than the high-yielding deposits for NRIs with a new report by Sumansa Exhibitions last month revealing nearly 80 per cent of NRIs were keen to buy apartments in their homeland.