Remittances into Kerala surged 36 per cent to record levels in the first half of the year, new figures showed, as Indian expats in the Arabian Gulf continued to take advantage of the rupee’s slide.
The Gulf is home to the majority of Keralites who live overseas. Keralites make up 55 per cent of Indian expats in the UAE, according to the UAE Embassy in New Delhi.
Remittances into Kerala reached more than 758 billion rupees (Dh44.38bn) in the first six months, a 36 per cent rise on the same period last year, figures from the state level bankers committee quoted by the Press Trust of India showed.
“It’s in line with what we have been seeing as well,” said Sudhesh Giriyan, the vice president and business head of the remittances company Xpress Money. “The last couple of months the rupee has gone to a different level altogether. We have seen a surge in Indian business, particularly the Kerala business, with Kerala being one of the key remittance states in India.”
The state of Kerala yesterday celebrated the most important day of the Onam festival, also known as the harvest festival, which has prompted Keralites to send even more money home.
“For about 15 days before Onam, the transactions really, really pick up momentum,” said Mr Giriyan. A combination of the rupee going down and the Onam season means that remittances to Kerala have been on the up.”
During the festive season, this cash is often spent on jewellery, clothes and even cars, Mr Giriyan explained.
The rupee has plunged to a series of record lows against the US dollar recently. It hit an all-time low of 68.84 less than three weeks ago, down more than 25 per cent from the beginning of the year. Its decline has been fuelled by the flight of capital from emerging markets on signals that the United States is set to scale back its financial stimulus programme, as well as concerns about India’s wide current account deficit.
The rupee remains weak, but it has strengthened from its historic lows in recent sessions and yesterday made further gains to trade at 62.47.
The dirham is pegged to the dollar, so the strength of the US currency means that more rupees can be bought for each dirham. Indians have increasingly been borrowing funds abroad in the past few months and sending them home to take advantage of the differences in interest rates, which are much higher in India, as well as the weakness of the rupee, Mr Giryan said.
“In the UAE, there are people who are taking huge loans and are sending even a crore [10 million] of rupees in one shot,” he said.
India is the single biggest recipient of remittances in the world, receiving US$69bn last year, according to the World Bank.
“Federal Bank has seen a surge in flows in fixed deposits and savings accounts from NRIs because of weakness of the rupee,” said A Surendran, the head of retail and international banking at Federal Bank, a major lender headquartered in Kerala.