Non-resident Indians seem to have ignored the attractive savings schemes floated by banks. Less than 20 per cent of the $5.185 billion (Rs 22,151.83 crore) redemption proceeds of the Resurgent India Bonds, which matured in the first week of October, have returned to banks.

Bankers said this could either mean that NRIs were low on confidence in the Indian market, or might have chosen to ignore the fixed-rate bank deposits in favour of the Indian equity market.

Another theory doing the rounds is that a large portion of the funds was "leveraged money". Essentially, this means that bond-holders borrowed money overseas to invest in the Resurgent India Bonds, and the funds flowed back to the lenders on redemption.

Less Attractive

SBI floated two new deposit schemes for NRIs, Pravasi Vaibhav and Pravasi Samriddhi, to tap RIB proceeds ICICI Bank, Bank of Baroda, the Union Bank of India & PNB were also in the fray to attract RIB redemption proceeds

"There is no way to prove where the money has gone. But one thing is for sure: very little of the Resurgent India Bond money has flowed back into the banking system," said a public sector bank chairman.

The State Bank of India floated two new deposit schemes for NRIs, Pravasi Vaibhav and Pravasi Samriddhi, to tap the Resurgent India Bond proceeds. Pravasi Vaibhav is a deposit scheme denominated in rupees with payment of maturity proceeds in dollars, while Pravasi Samridhhi is denominated in dollars and euros.

The bank expected to retain 30-35 per cent of the redemption amount through rollovers, but could get back only 10 per cent of the funds. SBI now plans to close the special deposit schemes.

ICICI Bank, Bank of Baroda, the Union Bank of India and Punjab National Bank were also in the fray to attract the Resurgent India Bond redemption money.

While ICICI Bank's offshore banking unit in Mumbai offered foreign currency deposit schemes to NRIs, Bank of Baroda launched a new deposit scheme, Baroda Anivasi Yojana, with interest rates ranging from 25 basis points to 60 basis points over their respective London Inter-bank Offered Rate rates for 1-3 years, depending on the amount and the tenure of the deposit.

The Resurgent India Bonds were floated on August 5, 1998, by SBI in three currencies -- dollars, pound sterling and deutsche mark. The bonds mopped $4.2 billion. The bank had to pay $5.185 billion to investors, inclusive of interest, on the bonds.