By IANS,
Dubai : Overseas Indians should take advantage of favourable exchange rates arising out of the current global financial crisis and invest in India, says M. Venugopal, CEO and managing director of India’s Federal Bank.
“I will ask NRIs (non-resident Indians) to take advantage of the current situation of high exchange rates and interest rates,” Venugopalan said in Qatar.
Venugopalan, who is on a tour of the Gulf, said that banks in India were safer in the face of the global credit crunch as these had “insignificant” exposure to the US markets and did not have a large presence of structured products, which had compounded the crisis in the West.
It was advisable to invest in non-resident ordinary (NRO) deposits or relatives’ domestic deposits as rates were higher now, the Gulf Times quoted him as saying.
The rupee has fallen to over 48 levels against the dollar as foreign institutional investors took out money from the Indian stock markets in the face of the crisis.
According to Venugopalan, at present NRO deposits of less than one year fetched an annual interest of 10.6 percent and those of less than three years got 10.5 percent, while non-resident external (NRE) savings deposits earned only a little over four percent.
“Even after tax is factored in, the return on NRO deposits is attractive (the net interest rate will be 9.5-9.6 percent),” the Federal Bank chief said.
Federal Bank has an NRI customer base of 400,000 with deposits of over Rs.56 billion or 20 percent of its total.
In a separate interview to the Kuwait Times, Venugopalan said that there was a serious liquidity crunch in India.
“This is mainly because of the non-availability of dollar. Foreign funds are exiting India following the global credit crisis and there is no perceptible cash inflow,” he was quoted as saying.
He, however, added that Federal Bank was not affected by the global financial turmoil as its shares were widely held.
“An individual shareholder cannot hold more than five percent of the bank’s shares,” Venugopalan said.
According to him, overleveraging by central banks across the world fuelled the sub-prime crisis, which started in the US, spread to Europe and then engulfed the rest of the world. But the efforts by these banks now have helped contain the crisis by a large extent from spreading further.
In India, he said, the Reserve Bank of India’s (RBI) decision to curb the liquidity of banks by raising cash reserve ratio (CRR) has helped it in regulating lending by Indian banks.
Venugopalan’s comments came even as remittances from the large expatriate Indian community in the Gulf saw a significant rise over the last one month.