Higher deposit rates offered to NRIs have helped the Reserve Bank of India preserve its forex kitty.
Indians abroad pumped in $1.6 billion (Rs 8,000 crore) into Non-Resident External (NRE) deposits in January, following the central bank's move in December to deregulate NRE deposit rates.
The above inflows are over twice that of the previous month.
NRE deposit inflows averaged $750 million a month in the three months ending December.
The deregulation meant that banks could freely determine the interest rates on these deposits.
The high interest rate situation allowed banks to hike NRE rates from 3-4 per cent per annum earlier to 6-8 per cent now, thus attracting inflows into these deposits.
The RBI started selling dollars from September 2011 to provide support to the sliding rupee.
It has since taken a few measures, including tweaking of ECB norms and freeing up of NRE rates, to ensure that its dollar-selling activity is offset by dollar inflows from abroad.