NRI remittances surge on rupee fall

Inflows rise both from people who send money to households back-home each month and those who repatriate savings sensing opportune time

The fall in the rupee's value against the dollar has pushed the pace of remittances from Indians abroad by 18 per cent. Flows into NRI (non-resident Indian) bank deposits have moved hand in hand, although at a rate less than the surge in 2013.

Foreign currency exchange dealers and bankers said the rise in flows was a typical trend when the rupee value goes down. Inflows have risen both from people who send money to households back home each month and those who repatriate savings when sensing an opportune time.

According to World Bank data, India received $70 billion (Rs 4.64 lakh crore) in remittances during 2014, the largest such recipient country in the world. The global total in 2014 was $583 billion. China got $64 billion, the Philippines $28 billion.

The rupee traded around 64 to a dollar in early August and then began to move down. It closed on Tuesday at 66.36.

Promoth Manghat, chief executive officer at UAE Exchange, said money coming into India through the remittance channel grew eight to 10 per cent over a year before in January-June. After the fall in the rupee's value, the flows are growing at 15-18 per cent.  If the rupee does not move down further, the pace might return to eight to 10 per cent. Those with disposable income, also termed opportunist remitters, time the decision to send money.

The amounts go up on a substantial dip in the value of a currency. Some NRIs have also taken loans abroad to deposit money in banks into India, since they get to reap twin benefits -- more of rupees due to devaluation and a better rate of interest compared to those abroad.

Banks have reported some increase in flows into NRI deposits in August-September till date. This is based on feedback from branches, said two public sector bank executives. The accretion to NRI deposits in April-July was $6.96 bn, as against $4.7 bn in April-July 2014, according to Reserve Bank data.

A senior State Bank of India executive said flows into NRE and NRO deposits were stable. These are maintained in rupee terms. The flow could be higher in the FCNR-B deposits, maintained in foreign currency.  In fact, higher flows into FCNR-B would create a challenge for deployment, as the demand for foreign exchange funds from Indian companies is presently low, reflecting slow economic growth.

“We have not yet revised the interest rate on FCNR- B deposits, since we might need funds (to lend) when the economic cycle turns in the next six to nine months,” he added.