Kerala, the state that attracts the largest share of remittances in India from abroad, is witnessing a slowdown in the flow, impacting NRI’s deposits in banks.
Deposits of NRIs that contributes 20 per cent to the overall remittances has slipped to 10 per cent, standing at Rs 2,29,636 crore at the end of Financial Year 2021. According to the World Bank, remittances to India marginally dropped to $83 billion in 2020.
In Kerala, the state-level bankers’ committee is yet to release data for NRI deposits for the first quarter of FY22. However, bankers said inflows are slowing.
“After an increase in the first couple of months, there is a decline in growth in deposits,” Ajay Kumar Singh, AGM of the NRI division at the State Bank of India, was quoted as saying by Moneycontrol.
Several banks attract a major chunk of NRI deposits in Kerala, including the State Bank of India that merged with the State Bank of Travancore. Growth in NRI deposits could slow to 6-7 per cent in this financial year, below the average of about 10 per cent.
On the other hand, Federal Bank, which contributes the highest share to NRI deposits among private lenders in Kerala, registered 10 per cent YoY growth to Rs 66,019 crore in the first quarter of FY22, though QoQ growth was 3 per cent.
South Indian Bank’s NRI deposits stood at Rs 26,663 crore by the end of June 2021. The bank recorded Rs 25,855 crore as of March 2021 compared to Rs 24,661 crore in June 2020.
The slowdown is being witnessed, probably because Indians who lost their jobs abroad due to the Covid-19 pandemic credited their settlement amounts into bank accounts back home. Notably, in FY21, comparatively less money was used for construction and other activities in the wake of the pandemic.
Apart from job losses and wage cuts, a rise in outflows could also be a factor for the slowing inflows, reckoned Ajay Kumar Singh. “According to Non-Resident Keralites Affairs (Norka) of the government, around 15 lakh migrants have returned after the pandemic,” he was quoted as stating. “This could be a major reason for the fall in deposits. Also, people may be using the money more now, unlike last year. Repatriation of funds is also happening. But there is no proportionate increase in the inflow.”
However, Murali Ramakrishnan, MD and CEO of South Indian Bank, said that growth in inflows appears to have stabilised after an abnormal increase in 2020.
