MUMBAI: With domestic interest rates hardening even as fixed income returns fall globally , there is a sudden spurt in remittances from non-resident Indians (NRIs) seeking to arbitrage between local and international rates. Indians are borrowing overseas at low rates and are remitting funds in India for investments. As on June 30, total NRI deposits on various banks was pegged at $53 billion. With the rupee depreciating over 18% in the last six months, non-residents are getting more for the dollar than ever before. Avijit Nanda, president TimesofMoney, told TOI, "NRIs are seen borrowing overseas at Libor minus rates and invest in Indian equities, mutual funds and real estate sectors. The FCNR rate for NRI deposits has increased by 125 basis points (Libor+125 basis points) effective from November 23, 2011, thus encouraging NRIs to open deposits in India. Our estimates are that the remittance flows into India have gone up 20-25 % when compared to the same period last year. NRIs are making the most of better interest rates in India." Private sector banks like Kotak Mahindra Bank and Federal Banks have witnessed over 40% and 30% surge in remittances respectively from the year ago period. According to World Bank estimates, India received $55 billion in remittances in 2010 and Gulf region accounts for almost half of that.
