100% returns on overseas investments for Indians

By agencies   |   Monday, 24 July 2006, 07:00 Hrs
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MUMBAI: Indian investors have been celebrating over returns from overseas investments, despite the rising global interest rate in India’s stock markets.

Overseas investments have more than doubled in them last five years. Latest balance of payment figures show that income from investments has reached the $5.5 billion in March-end 2006, rising sharply by $2.2 billion from the fiscal year of 2001. The fiscal year of 2006 has witnessed a steep rise by 25 percent.

Despite a flat growth in foreign currency assets in the country’s apex bank during the year, the income has sharply risen, accounting for half of the country’s investment income. Reinvested earnings, interest flowing from loans to NRIs and RBI investment earnings constitute the bulk of India’s investment income. This has resulted in the RBI in not substantially increasing investments in securities during the fiscal year.

Investment income comprises mainly the interest received on loans to non-residents, dividends/profits on foreign investments, reinvested earnings, interest gained from debentures, federal reserve notes, CPs, fixed deposits and funds held abroad by AD s out of foreign loans and export proceeds. Interest on overdraft of VOSTRO accounts of foreign correspondents and branches by AD s is another important factor.

RBI deploys a bulk of its reserves to other apex and foreign banks as deposits. They are channelized as sovereign securities of leading economies and superior corporate papers there. However, RBI experienced a delay in its exposure to overseas securities during the year.

Liberalized overseas investment norms have attracted Indian corporates towards several overseas companies. In return, these companies have reinvested their earnings from these investments. Indian corporates, banks, financial institutions and retail investors can now invest in various financial institutions overseas to a certain extent.

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