Rupee fall: NRIs take loans to remit money

Remittance into India from foreign countries has already seen a jump of 25% in the last two months

Non-resident Indians (NRIs) are taking loans to remit more money to India to benefit from the rupee depreciation. Some are even borrowing money from informal sources and sending their savings deposits to India.

The frenzy is fuelled further by banks, especially in the United Arab Emirates (UAE), which offer lucrative personal loan schemes. The average interest rate on loans in these places range from five to six per cent.

Remittance into India from foreign countries has already seen a jump of 25 per cent in the last two months. This is expected to go up further as the weak domestic currency hovers around the 70- mark against the dollar. With 25 million people of Indian origin around the world, India was one of the biggest recipients of global remittance, $70 billion last year.

The rupee tumbled to 68.8 against a dollar on Wednesday over concerns that foreign institutional investors might continue selling stocks in the absence of concrete steps to rein in the current account deficit. It settled at Rs 66.55 on Thursday.

“NRIs always used to send money from abroad. But with the kind of freefall the rupee has taken in the last 10 days, it has surely seen an impact on remittances. People are taking loans from banks to send money back home in India as this will actually result into more value back home. This practice is picking up steam,” said Sudhesh Giriyan, vice-president and business head, Xpress Money.

The average loan amount taken by NRIs are in the range of about Rs 1.5 to Rs 2 crore, while there is no upper limit as some high net worth individuals are borrowing money of a much higher amount to make the most of it. Major banks such as Emirates NBD, ADCB and Ras-Al-Khaima Bank have started to lure such borrowers with lucrative personal loan offers.

According to Promoth Manghat, vice-president (global operations) at UAE Exchange, it is not only banks that are lending as people are taking money from informal sources as well. “For example, friends. We have seen NRIs borrowing money from friends to send it home. One of the big attractions is that the interest rate is lower here compared to other geographies. Overall remittance has already seen a jump,” said Manghat.

Echoing Manghat, Kiran Shetty, managing director of Western Union India, said: “Our assumption is that people are shifting their savings deposits as well and it is not only the regular monthly payments that are coming to India.”

According to Manghat, there are very high chances that total remittance into India from across the globe can cross an estimated $85 billion this year. “

This can go well above $85 billion this year, given the way the rupee has lost its shine. Markets, too, have rejected the steps taken by the finance minister and the recent food security Bill also added to the under confidence of market.”