With the Indian remittance economy witnessing a downfall due to the Covid-19 pandemic, Kerala saw an increase in deposits from non-resident Keralites.
It was being predicted that Kerala would be in trouble as more than 12 lakh NRIs would come back to the state last year. However, the deposits by non-resident Keralites rose 14 percent to Rs 2.27 lakh crore in 2020 as the Coronavirus pandemic ravaged the country. World Bank data stated that India received USD 83 billion in remittances in 2020, which is down 0.2 percent from USD 83.3 billion in 2019.
According to the World Bank data, Kerala saw a USD 267 drop in monthly remittances per NRI, but without quantifying it. Considering the massive fears that the planners in the state had about a 25% plunge, this improvement was incredible.
The state-level bankers’ committee (SLBC) data suggested that as of December-end 2020, NRI deposits stood at Rs 2,27,430 crore — a 14% growth from Rs 1,99,781 crore in 2019. When compared to September 2020, this was up 2 percent from Rs 2,22,029 crore
“An estimated 1.2 million migrant workers, of over 4 million who worked in the GCC countries and contributed 30 percent of the state’s income, returned to Kerala in 2020 after the pandemic left them jobless. Low-skilled workers were the hardest hit,” the World Bank’s Migration and Development Brief report said.
Kerala has a resident population of 3.48 crore. As per Non-Resident Keralites Affairs (Norka), as many as 40 lakh Keralites live or work abroad, most of them are in the Gulf.
As for remittances, they refer to foreign currency funds sent by expatriates, and it is important to note that NRI deposits are not remittances. They are, rather, private money parked in NRE accounts in the domestic bank. This private money could be the proceeds of sources, including selling assets in the host country where the NRIs were working earlier. NRI deposits, which do not attract tax, can be repatriated fully on maturity.
According to an SLBC official, there may have been a spike in deposits because NRIs who returned after losing their jobs or retirement may have deposited all their savings in NRE (non-resident external) accounts to save on taxes. Although people are supposed to convert the NRE account to resident accounts as soon as they return, they tend to continue using their NRE account because of the possibility of returning overseas.
More than 12 lakh non-resident Keralites have returned to the state while the pandemic was wreaking havoc. Most of them returned after losing their overseas jobs.
NRI deposits have steadily risen in Kerala over the years. Between June and September 2020, when the pandemic was at its peak, Kerala got Rs 3,833 crore or 2 percent more in NRI deposits at Rs 2,18,196 crore. Between September and December 2020, a similar growth of 2 percent or Rs 5,401 crore was observed, as per the SLBC data.
51.91 percent of the total NRI deposits were with private sector banks, led by Federal Bank. 46.51 percent were with public sector banks led by State Bank of India, 0.83 percent with small finance banks and the remaining 0.76 percent with Kerala Grameen Bank.