The slump in NRI deposits, the mainstay of foreign exchange reserves in the country, indicates that NRIs see banks in India as a less attractive channel for investment. A comparison of estimated net flows under non-resident deposits during April-November 1998 vis-vis the corresponding period of 1997 shows a compositional shift in favour of rupee denominated accounts in response to the policy initiative undertaken in 1997-98.

However, the foreign exchange level has remained above the $ 30 billion level, thanks to heavy inflows through the FII route and foreign direct investment in several projects. Outlining the measures that the Finance Ministry and the Reserve Bank of India need to initiate, theAssociated Chambers of Commerce and Industry of India (Assocham) has suggested a fourfold strategy to stem the drastic fall in NRI deposits.

It said the interest rate offered on NRI deposits should be raised especially for the long term. Moreover, the Resurgent India Bonds scheme which mobilised $ 4.2 billion during August 1998 needs to be replicated by introducing other such schemes to attract NRI and foreigners' deposits.