BY MOHAMMAD SHOEB
DOHA: On account of the weaker Indian rupee against Qatari riyal, the demand for personal loans in Qatar has increased despite stricter Qatar Central Bank regulations. At least one branch manager of a leading commercial bank, with one of the highest Indian expatriate customers, said the request for personal loans increased by up to 40 percent in July (year-on-year).
The Indian rupee has depreciated nearly 25 percent against the dollar over the last few months, becoming one of the worst performing currencies in South Asia, prompting many Indian expatriates to opt for loans to invest in India.
The Qatari riyal, which is pegged to the dollar (1$=3.6415), fetched nearly Rs12 less than three years ago, but is now being traded at Rs18 plus per Qatari riyal. The currency firmed a bit after hitting the lowest level last week losing over 50 percent value since September 2010.
Aiming to take advantage of a weaker rupee, a large number of Indian expatriates are borrowing in riyals to invest in India where the interest rates (on fixed deposits) are apparently higher than local rates.
"The demand for personal loans is the highest among all our products. It picked up momentum from last May, and the number of applications reached to the highest level in July registering an increase of over 40 percent. Those seeking personal loans are mostly being Indians," said a branch manager of Doha Bank who did not want his name in print.
However, analysts suggest that it is not rational to borrow in riyals to invest in rupees unless the rate of returns is higher than the cost of borrowings. There is a nominal difference in cost of borrowing here and deposit rates in India. One should compute the real rate of return by adjusting it with inflation.
India's main gauge of inflation, the Wholesale Price Index, increased to 5.79 percent from a year earlier, up from 4.86 percent in June. The inflation rate, based on Consumer Price Index (CPI), which is the main inflation indicator in most countries, was nearly 11 percent.
In July, the country's central bank (Reserve Bank of India) increased the interest rate at which it lends to other banks and also put a cap on their daily borrowings.
However, bankers in Qatar, in contrast with financial analysts, do not see any problem with the idea of borrowing in riyals to invest in rupees.
"For people who have the capacity to borrow, it is a good option to invest in India now. The rupee has touched a historic low. What is happening is quite natural… It is not only adding value to Indians but to India as well," said Dr R Seetharaman, Group CEO of Doha Bank.
Asked given the high rate of inflation in India, if it was a financially viable, he said: "India has strong macro economic fundamentals. The currency will bounce back in the coming days. It is a temporary aberration."
Commenting on the high capital outflow he added: "The current currency depreciation is because of external factors and tapering which the US is trying to do by rolling back its bond buying programme. It is having implications not only on Indian rupee but other currencies as well."
According to figures available, the Brazilian real (20 percent), Indonesia rupiah (25 percent), Thailand's baht (20 percent) and Russian ruble (14 percent) have depreciated significantly over the last few years.
Dr Seetharaman anticipated that government measures such as sovereign bonds and bonds for non-resident Indians (NRIs) will strengthen the currency.
"I foresee the rupee getting stabilised at Rs60/dollar in the days to come, probably in the next one month."
Several banks in Qatar, including Doha Bank and Commercial Bank, are having attractive offers and promotions for customers seeking personal loans with flexible repayment facilities and affordable interest rates and interest holidays.
The Peninsula
