time to invest’ in Indian deposits - ‘Indian banks are
OCT 11, 2008
Venugopalan ... ‘Indian banks are safer’
By Santhosh V Perumal
INDIAN expatriates should cash in on the current favourable exchange
rate and high interest offered by banks in India by investing in
their country, according to a top banker.
Moreover, Indian banks were safer as their exposure
to the US was “insignificant” and the country did not
have a large presence of structured products which compounded the
US banking crisis, said Federal Bank managing director and CEO M
“I will ask NRIs (non-resident Indians) to take
advantage of the current situation of high exchange rates and interest
rates,” he said.
Federal Bank has an NRI customer base of 400,000
with deposits in excess of Rs56bn, or 20% of its total.
It was advisable to invest in non-resident ordinary (NRO) deposits
or relatives’ domestic deposits as rates were higher now,
Federal Bank, which has 608 branches and 537 ATMs
in India, has tie-ups for remittances with Doha Bank and City Exchange,
National Exchange, Gulf Exchange, Habib Qatar and Al Dar Exchange.
At present, NRO deposits of less than one year fetched
an annual interest of 10.6% and those of less than three years got
10.5%, whereas non-resident external (NRE) savings deposits earned
only a little over 4%, Venugopalan said.
However, unlike NRE savings accounts, NRO accounts attract a tax
of 10% in the case of Qatar. Tax is higher at about 33% for NRIs
of countries that do not have double taxation avoidance treaties
“Even after tax is factored in, the return
on NRO deposits is attractive (the net interest rate will be 9.5-9.6%),”
With global equity markets in the doldrums and interest rates set
to decline, it would be better to invest now in NRO and other domestic
deposits offering high returns, he said.
Federal Bank’s total business crossed Rs480bn
with deposits of about Rs270bn and advances of Rs210bn as of June
Venugopalan hinted the bank may manage one of the exchange houses
in Qatar, while maintaining the existing ties with other firms.
It plans to open 70 more branches this year, mostly
in Tamil Nadu, Karnataka, Maharashtra, Gujarat and Delhi. It also
plans to add 100 ATMs.