Amid geopolitical tensions in West Asia, money inflows from non-resident Indians to Kerala have remained steady, with leading banks in the state reporting growth in NRI deposits during the January-March quarter.
Data from Kerala-based Federal Bank and South Indian Bank showed a quarter-on-quarter rise in non-resident deposits, signalling that remittances — a key driver of Kerala’s economy — have largely remained unaffected by the ongoing Iran conflict.
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The increase in inflows was also aided by a 5.4% depreciation of the rupee between January and March, which boosted the value of remittances when converted into Indian currency. Federal Bank’s non-resident deposits rose 7% quarter-on-quarter to Rs 1.03 lakh crore by the end of March.
Since the growth outpaced the rupee depreciation, it also pointed to higher foreign currency transactions. The bank continues to hold a significant share in inward remittances to Kerala.
“Remittances, as of now, remain elevated. My sense is that unless you see significant job losses and returning Indians from UAE for good into India, I don’t think this story is likely to change immediately,” Federal Bank Managing Director KVS Manian told analysts in a post-earnings interaction.
South Indian Bank, meanwhile, reported a 4.2% rise in inbound flows to Rs 35,371 crore during the same period, largely driven by currency depreciation. These two lenders, along with the State Bank of India, are among the top banks attracting NRI deposits in Kerala, according to people aware of the matter.
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South Indian Bank Managing Director PR Seshadri told Economic Times, “We have a large business in the Middle East in the area most impacted by the current crisis. Our view is that in the short run, it will be a positive for us in the sense that people living in those areas may want to transfer money back home so as to protect themselves in the future. So, there will be increased flows.”
However, experts cautioned that a prolonged conflict in West Asia could affect remittance inflows over time if livelihoods of expatriates in Gulf countries are hit. “The problem will happen if the issue continues over a longer period and people’s livelihoods in those countries are impacted… Those balances will get drawn down when those individuals come back home,” Seshadri said.
According to Reserve Bank of India data, more than one-third of India’s remittances — amounting to Rs 3.74 lakh crore in 2023-24 — came from Gulf nations including the UAE, Saudi Arabia, Qatar, Kuwait and Oman.
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