Amidst the escalating West Asia crisis and geopolitical conflict involving Iran, non-resident Indians (NRIs) executed massive net withdrawals from their Indian bank deposits.

Data released by the Reserve Bank of India (RBI) reveals that NRIs pulled nearly $2 billion (approx. ₹16,500 crore) out of their domestic bank accounts in March 2026 alone. This sudden monthly reversal caused the total pool of outstanding NRI deposits with Indian banks to contract from $167.58 billion in February down to $165.65 billion at the close of the fiscal year.

1. The Regional Squeeze: Where the Money Left

The structural breakdown of the capital flight shows that the outflows were concentrated entirely in rupee-denominated accounts, which are heavily utilized by blue-collar workers and professionals living in Middle Eastern corridors:

• Non-Resident External Rupee Accounts (NRERA): Outstanding balances fell to $98.56 billion at the end of March, declining from $99.77 billion a year earlier.
• Non-Resident Ordinary (NRO) Accounts: Total funds dipped to $33.33 billion against $34.09 billion in the prior period.
• Foreign Currency Non-Resident Bank (FCNR(B)) Accounts: In stark contrast, these foreign currency-denominated accounts—predominantly used by affluent NRIs settled in Western economies like the US and UK to shield their money from rupee volatility—remained steady, ticking up marginally to $33.76 billion.

2. The Macro View: Slower Full-Year Inflows

The massive single-month withdrawal in March directly dragged down India’s broader full-year remittance and deposit performance metrics for the complete fiscal year 2025–26 (FY26):

Banking executives note that when geopolitical instability strikes the Gulf, workers often hoard cash locally or liquidate overseas investments to secure immediate liquidity, fearing unexpected regional economic disruptions or employment cuts.

3. The Secondary Pressure: Surging LRS Outflows

While money flowing into India via NRI channels took a temporary hit, capital moving out of India via resident individuals saw a sharp uptick.

Parallel RBI data highlights that outward remittances under the Liberalised Remittance Scheme (LRS) jumped 10.9% month-on-month to $2.59 billion in March 2026.

This outbound drain was led by robust international travel demand ($1.09 billion) along with a massive 65.5% month-on-month surge in overseas equity and debt investments ($440 million), as resident Indians aggressively capitalized on global market volatility. The combination of slowing NRI deposits and climbing LRS outflows is expected to apply incremental short-term pressure on the rupee’s exchange value heading into the new fiscal year.