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C.J. Punnathara

KOCHI, March 19

AS the threat of war looms over the Gulf region, NRI remittances from there have gained momentum.

"Though remittances were growing throughout the current year, there has been a marked upswing during the last three months when war became imminent," Mr K.P. Padmakumar, Chairman of Federal Bank, said.

The trend is most evident from countries neighbouring Iraq, such as Kuwait, and remittances from that country seems to have grown substantially in the past few months, Mr A. Sethumadhavan, Chairman of South Indian Bank, said.

While Federal Bank reported total remittance of Rs 1,875 crore during April-December 2001, it grew stridently to Rs 2,430 crore during the corresponding period this year. However, during the last three months, remittances further peaked to Rs 900 crore, averaging close to Rs 300 crore per month.

Remittances from Kuwait alone has grown by close to 40 per cent during last month, Mr Padmakumar said.

Though the epicentre for the spurt in remittances might be Kuwait, it encompassed all the Gulf countries, Mr Padmakumar said. Countries such as Saudi Arabia, Dubai, Abu Dhabi, Doha have all contributed to the increased inflow. Though this spurt is expected to add to the foreign exchange reserves of the country handsomely, the flow is expected to taper off when the war commences, Mr Padmakumar added.

Moreover, he said that the growth in remittances was not accompanied by a corresponding growth in NRI deposits. "The conversion rate from remittances to NRI deposits is far lower that what it used to be last year and the poor returns seems to be forcing people to invest elsewhere or in consumptive expenditure," he said.

Yet, NRI deposits held with banks seems to be on an upward spiral. "The corpus of NRI deposits held with our bank has shown a healthy growth of close to Rs 400 crore during the current year and is now touching close to Rs 2400 crore currently," Mr Sethumadhavan said.

Most NRIs seems to have juggled their savings from foreign currency to rupee accounts. The flow into FCNR deposits has virtually tapered off, which has more to do with the adverse interest rate structure, bankers said.

Several banks now offer interest on FCNR deposits at 0.25 points lower than LIBOR, which is often lower than what is available in the international markets.

"The steady nature of the rupee during the past few months has also dissuaded NRIs from investing in FCNR deposits. Unlike last year, there has been no substantive bulk deposits into FCNR accounts this year," Mr Sethumadhavan said. But the strength of the Indian currency and the huge foreign exchange reserves at the command of the Indian economy has ensured that the NRI deposits have continued to grow.

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