Why is India's RBI not reviving NRI deposit schemes?

The RBI prefers structural reforms like easing FDI norms and promoting ECB inflows over past crisis management tools such as NRI deposit schemes.

What is the current liquidity situation in India?

Liquidity stress is evident as deposit growth lags behind credit expansion, leading banks to increase rates on bulk deposits and certificates of deposit.

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RBI Shuns NRI Window for Structural Reforms

Q: What structural reforms is India's RBI focusing on?

The RBI is focusing on liberalizing norms for Foreign Direct Investment (FDI) and External Commercial Borrowings (ECBs) to bolster capital inflows.

23 Mar

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Summary

RBI prefers structural tools over NRI deposit window.
Liquidity stress evident as deposit growth lags credit.
Market seeks tax relief, RBI focuses on FDI and ECB inflows.

RBI Shuns NRI Window for Structural Reforms

India's financial markets are experiencing significant liquidity stress, characterized by deposit growth lagging behind credit expansion. Banks are consequently raising rates on bulk deposits and certificates of deposit. Market participants are advocating for the revival of NRI deposit schemes and tax relief for foreign investors, similar to measures employed during the 2013 taper tantrum.

However, the Reserve Bank of India (RBI) indicates a preference for structural reforms over these past crisis management tools. Officials suggest that India's strong forex reserves, at 9.8 months of cover, do not necessitate a crisis-style response. The focus remains on bolstering capital inflows through liberalizing norms for Foreign Direct Investment (FDI) and External Commercial Borrowings (ECBs).