NEW DELHI, JULY 05, 2005
PRABHAKAR SINHA
TNN
With domestic banks lowering foreign currency deposits
rates to bring them in line with international rates,
NRI deposits evaporated during 2004-05 and
it turned into a net withdrawal of $1.1 billion as
against a net deposits of $3.6 billion.
Despite, net withdrawal by NRIs, the foreign
currency reserve during 2004-05 went up by $28.6 billion
as against $36.9 billion in 2003-04. This is mainly
on account of inflows from invisibles and external
commercial borrowings.
A senior banker said as the economy revived during
2004-05, the companies have approached international
market to raise debt funds. During the year, companies
raised $ 5.9 billion through external commercial borrowings
as against net reduction through repayment of $ 1.5
billion in the previous year. This is also because
external borrowings became competitive as against
domestic funds.
The companies which raised funds during 2004-05 are
Gateway Terminals India Pvt Ltd ($ 174.34 million),
Amtek Auto Ltd ($ 150 million), HDFC Ltd ($112.59
million) and Jubilant Organosys Ltd ($100 million).
As the foreign reserves surged and the banks were
facing the problem of plenty, they reduced the interest
rates on foreign currency to around 3.5% from around
5% in 2003-04. This led to drastic fall in the NRI
deposits.
Inflows through invisibles increased by $31.70 billion
in 2004-05 as against $26.01 billion in the previous
year.
Despite huge surge in receipts through invisibles,
the current account became negative because of the
huge trade deficit to the tune of $ 38.13 billion.
However, because of inflow of $ 32.5 billion under
capital account, there was a net accreation of $ 26.15
billion. On account of change in valuation due to
dollar’s depreciation against pound sterling
and euro, the reserve went up by $ 2.4 billion.
