Depreciating dollar turns a vibrant village dormant

Madhapar in Gujarat sees zero percent growth in NRI deposits.

This dusty town in the border district of Kutch is known to be a benchmark in NRI deposits and remittances. Being home to a large number of rich non-resident Gujaratis (NRGs), Madhapar, has over the years, become a happy hunting ground for bankers.

But now, Madhapar could exemplify the damage rupee appreciation has caused to NRI deposits and remittances. NRI deposits have witnessed zero per cent growth in the current fiscal as compared with 10 per cent in 2006-07.

Bankers believe that it is neither the uptown Chandigarh nor the God's Own Country Kerala, but this 15,000-odd populated village in Gujarat that is the epitome of NRI deposits. With Rs 5,000 crore, it boasts of the richest village in the country.

"The recent rupee appreciation has left a dent in the NRI deposits and remittances segment, especially in Madhapar. As compared with a growth of 10 per cent in 2006-07, there has almost been no growth so far," says GG Joshi, general manager of Bank of Baroda, Gujarat, which has seen a status quo in the growth of NRI deposits since March 2007.

The NRI deposits from Madhapar, which stood at Rs 320 crore in 2006-07 after a 10 per cent year-on-year growth have not moved ahead. What's more, similar sentiments are echoed across several banks which fear a further 10-12 per cent rupee appreciation may mean a negative growth.

OP Bhatt, chairman of State Bank of India said, "Growth in NRI remittances and deposits has not only stopped but has also begun declining to some extent."

For BoB, while the NRI rupee deposits grew 6.57 per cent in 2007-08 as against 6.43 per cent in 2006-07, the NRI foreign currency deposits saw a negative growth of - 3.45 per cent in 2007-08 as against 10.95 per cent in 2006-07.

Even the state level bankers' committee (SLBC), where Dena Bank acts as a convenor, figures indicate a marginal growth in NRI deposits to Rs 18, 919.43 crore in March 2007 from Rs 17,210 crore so far.

"Banks in Gujarat had witnessed a growth of Rs 1,624 crore between March 2006 and December 2006. Since Gujaratis are known for their enterprising skills, a rupee appreciation has forced them to avoid direct deposits and remittances and instead go for other alternatives like real estate funds or gold funds where the pinch is less," said JM Patel, chief manager, SLBC.