Can NRI deposits be the saviour of the currency?

Thursday, September 20th, 2018

Interesting and pertinent observation by Jehangir Aziz of JP Morgan in an interview with Bloomberg Quint

 

 

Currently the narrative around the rupee is that if things “get really bad” then the RBI can step in, issue NRI bonds and that would keep the currency in check. Jehangir Aziz observes that if you look at what actually happened in 2013-2014, things were actually a lot more challenging.

To paraphrase: It started with a 300 bps rate hike, followed by a large fiscal tightening in a pre-election year and only then did the government go for the NRI deposits. And they did not come cheap; a massive subsidy was provided to Indian commercial banks to ensure it was lucrative enough to get the deposits.

If we were to try NRI deposits again this time around, things may be more costly and difficult than market participants believe.


About the author

Rishad is the founder of Kairos Capital. He started his career with Standard Chartered Wealth Management and has extensive experience in markets, particularly in terms of mutual funds and stocks.

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