The Hindu Business Line : South-based banks see higher NRI remittances

Mumbai, March 16 Leading south-based banks such as Federal Bank, South Indian Bank and Catholic Syrian Bank have seen a spurt in remittances from Non-Resident Indians from October 2008.

The depreciation of the rupee, the fear of failure of international banks and the comparatively higher rates offered by Indian banks have resulted in increased flow of NRI funds into the country, said bank officials.

Federal Bank’s NRI deposits have risen by almost 24 per cent in the 11-month period of April 2008-March 2009. As of mid March 2009, Federal Bank has collected Rs 6,700 crore in NRI remittances, an addition of around Rs 1,300 crore from Rs 5,400 crore in March 2008.

The depreciation of the rupee vis-À-vis the dollar has resulted in a sudden spurt in the NRI remittances, with the growth being much more visible from December, said a senior Federal Bank official.

The rupee touched a low of 52.18 against the dollar on March 3 and has depreciated by around 7 per cent against the greenback since the beginning of the current calendar year and almost 30 per cent since April 2008.

The growth in NRI deposits has mainly been in the ordinary non-resident accounts, the official said.

NRI remittances constitute around 20 per cent of total deposits of Federal Bank.

In the case of South Indian Bank, though the growth in the remittance was flat in the first six months of the fiscal, there has been a definite pick-up from October, a South Indian bank official said.

NRIs now consider Indian banks as a safe haven to deposit their money. Also, with the rupee even depreciating against the currencies of some Middle Eastern countries such as the Saudi Riyal and the UAE dirham, more NRIs are sending money back home, the official said.

Even after taking into account the tax deductions, the interest rate on NRO deposits are higher compared to the rates offered by other countries. With most of the central banks around the world having cut key interest rates close to zero per cent, the higher interest rate differential is also making the Indian banks an attractive destination for the NRIs to park their funds.

Also, in September 2008, the RBI had hiked the interest rate ceilings on NRI deposits to LIBOR plus 175 basis points for NRE deposits, and LIBOR plus 100 basis points for FCNR(B) deposits, increasing the interest rate differential, the official added.

South Indian Bank has collected around Rs 3,350 crore in NRI remittances as on March 13, 2009, against around Rs 3,090 crore in March 2008, according to an official with its NRI cell.

In the case of Catholic Syrian Bank also, NRI remittances have increased by around 50 per cent in this fiscal.

In fact, in its March 2009 bulletin, the Reserve Bank of India said that there has been no slowdown in the inward remittances.

“As inward remittances depend upon the interest rate differential and the exchange rate movement, due to the rupee depreciation in the recent period, there has been a significant rise in the inflows, particularly through the rupee denominated NRI accounts such as NRO and NR(E)RA schemes,” the RBI said.

Going ahead, there could be a slight dip in the NRI deposits. With growth in global economies slowing down, job losses are a major fear among the Indian community abroad, the Federal Bank official said.

Related Stories:
Non-resident deposits picking up in Kerala
Remittance up on weak rupee

More Stories on : Private Banks | NRIs | Forex

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