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Worried about the sharp drop in the rupee's value against the dollar, the Reserve Bank (RBI) of India has opened avenues for Indians abroad to get higher earnings by sending more money back home. The flow in non-resident Indian fixed deposits has seen an increase. Remittances from West Asia, however, have remained steady. This amount goes to finance monthly household expenses, bankers said.
A senior State Bank of India (SBI) official said most banks including the country's largest lender, have seen a substantial growth in the accretion to Non Resident External (NRE) Deposits after the sharp slide in the rupee against the dollar.
"It is difficult to put out a number at the end of July. But month-on-month flows are growing substantially. Of course, we cannot compare flows today with the period after RBI raised the cap on interest rates offered on NRE deposits," the official said. In December 2011, RBI had allowed banks to pay interest rate in line with those that offered domestic term deposits. According to RBI data, NRE deposits flows were $ 2.89 billion in April-May this year as against $ 5.56 billion in April-May 2012. May this year, was the beginning of the fall in the rupee. Hence, it did not show any effect immediately. Bank of Baroda officials said there was good growth in NRE deposits. The flows in the form of remittances are steady.
An ING Vysya Bank executive said there was a sharp rise in fixed deposits in the last 12 months, which was the combined effect of a rise in the cap on NRE deposits and the fall in rupee value since the fourth week of May. Middle and high income earning Indians in West Asia and the developed world have stepped up remittances in real estate and the capital market. In fact, some of them borrow money abroad to park funds in India, said an executive with UAE Exchange Ltd, a remittance company.
Blue collar workers, who account for 75 per cent of the Indian diaspora in West Asia, are unlikely to increase monthly amounts sent to India, The annual remittances to India are expected to touch $73 billion in 2013, said the UAE Exchange executive.
According to World Bank data, remittances to the South Asia Region are estimated to have increased sharply in 2012, growing by 12.3 per cent to reach $109 billion. India remains the largest recipient country in the world, receiving almost $70 billion in remittances in 2012.
