G20 vows to reduce cost of transferring remittances to 5%

India is the single largest recipient of non-resident remittances, says Railways Minister Suresh Prabhu

Taking concerns of India and other developing countries on board, the G20 today vowed to take "strong practical" measures to reduce the global average cost of transferring remittances to 5%.

India, which is world's largest recipient of remittances with $71 billion sent last year, pushed for a reduction in the remittance costs of non-residents at the G20 summit that ended today, asking it to work on steps to reduce costs in sending money home from abroad which is as high as 10% in some countries.

"We commit to take strong practical measures to reduce the global average cost of transferring remittances to five% and to enhance financial inclusion as a priority," the three-page communique released by leaders of the group of 20 major and leading emerging economies said. Prime Minister Narendra Modi was among the participants.

Railways Minister Suresh Prabhu, who is Modi's sherpa' at the deliberations, said "Indians send maximum money back to their country. India is the single largest recipient of non-resident remittances. NRIs remit close to $70 billion, more than the Filipinos and the Chinese."

The cost of remittances, at times, is as high as 10%, Prabhu said.

Ahead of the summit, he said, "It's an ethical, logical and economic issue. We are pushing for some understanding in the G20 that the cost should not be more than 5%."

India has been able to convince Saudi Arabia to reduce it to 3.5%, he added.

In a separate G20 plan to facilitate remittance flows annexed to the communique, the grouping described as an innovative step with the potential to reduce the cost of remittance transfers the RBI's move to facilitate the receipt of foreign inward remittances directly into the bank accounts of beneficiaries under the Money Transfer Service Scheme (MTSS).

It also recognised the value of remittance flows in helping to drive strong, sustainable and balanced growth.

Noting that remittances to developing countries in 2014 are expected to reach $436 billion, far exceeding Official Development Assistance(ODA), the plan said remittances to and from G20 countries account for almost 80% of global remittance flows.

"The G20 recognises the value of remittance flows in helping to drive strong, sustainable and balanced growth. Remittances represent a major source of income for millions of families and businesses globally, and are an important avenue to greater financial inclusion," it said.