Non-resident deposits
Also called: NRI deposits · Topic: Balance of Payments and Exchange Rates · NCERT: Class 12, Ch 6 "Open Economy Macroeconomics"
Meaning
Non-resident deposits are money that non-residents, mainly NRIs (non-resident Indians), keep in Indian banks. They are held in FCNR(B), NRE and NRO accounts. In the BoP they are part of banking capital in the capital account, because they are loans by non-residents to Indian banks. They can flow out quickly when confidence falls.
Example
In NCERT's Table 6.1, NRI deposits are US$9 million out of net banking capital of US$15 million. In 1990-91, NRI deposits fled India and helped trigger the BoP crisis. In the 2013 taper tantrum, India used an FCNR(B) swap window to raise about US$34 bn.
Don't confuse with
- Remittances: money sent home by Indians working abroad is a transfer in the current account, and nothing is owed back. A deposit is a claim the non-resident can withdraw, so it is a capital account item.
Related concepts
- Capital account
- BPM6
- Capital flows
- Foreign Direct Investment
- Foreign portfolio investment
- Greenfield and brownfield investment
- Automatic route and government route
- Overseas direct investment
- Round-tripping
- External commercial borrowings