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Cashing in

Wednesday, 14 August 2013
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Indians living abroad are seeing the brighter side of a crippled rupee when sending money home



The recent slump in the rupee has created an uproar in the country, with many calling for stringent protective measures to bolster the currency. However, while residents of India may suffer, non-resident Indians, and those comprising the Indian diaspora in foreign countries have taken advantage of the plummeting rupee. Remittances, which are transfers of money sent from abroad, largely by Indian migrant workers to their families, have increased sharply in the last few months.

The RBI estimated that India, which has consistently led the world in terms of inward remittances, received a total of approximately $ 70 billion in 2012. This was up from $58 billion in 2011. A spokesperson from ICICI Bank, which claims to be a leading player in the market says, "With the movement of USD/INR rate on account of depreciation in rupee, during June 2013 our inward remittances volume grew by 25 per cent over the previous month."

"Indians are very savvy people," opines Kiran Shetty, managing director and regional vice-president, western Union, which has been present in the country for two decades. "They have savings," he says, and elucidates that "generally, as and when there's a favorable currency movement for consumers," Indians abroad have taken advantage, and used the opportunity to remit money, and make more out of their savings.

Federal Bank, another leading player in terms of NRI accounts, has also seen a rise in its balances. The bank closed FY13 with ├óÔÇÜ┬╣15,266 crore in NRI balances; today the number stands at ├óÔÇÜ┬╣17,317 crore, according to A. Surendran, head of international and retail banking, Federal Bank. ÔÇ£The rupee weakening has prompted NRIs to send moneyÔÇØ he states, adding that most of the bankÔÇÖs inward remittances are received from Gulf Co-operation Council (GCC) countries. Remittances from non-GCC countries make up only around 20 per cent of the total amount. The months of May and June have seen particularly large increase in remittances, with people sending home more money more frequently. Surendran explains that this is because Indians living abroad have sent home money before flying home themselves for their summer vacation. The trend may plateau in July and August because of vacations and Ramadan, but ÔÇ£afterward I expect the tempo to continue,ÔÇØ he says of the rate of remittances. There is a danger in remitting money too early, however, given some speculations that the rupee will drop even further against the dollar. It is currently at around ├óÔÇÜ┬╣65 against the dollar. In this situation, Indians remitting from abroad would lose out on the advantage of the currencyÔÇÖs further depreciation unless they hold out on sending money until a more opportune time. However. Surendran disagrees with this. He explains that while wealthier Indians, and high net worth individuals might wait to remit, many remitters are blue-collar workers, and are compelled to send money back home on a regular basis.

 UAE Exchange Remittance Data

On the rise

UAE Exchange, a global money transfer company, which claims it handles around 10 per cent of global remittances to India, also has data to show the marked increase in remittances to India, also has data to show the marked increase in remittances ot the country. ÔÇ£There has always been organic growth,ÔÇØ says Mr.┬áPromoth Manghat, vice-president, global operations, UAE Exchange. With both skilled and unskilled Indian workers being in demand in foreign countries, the size of the Indian diaspora has been steadily increasing, thus leading to a steady increase in remittances as well. However, ÔÇ£this year, because the rupee moved so sharply, weÔÇÖve seen a growth of 15-18 per cent above normal growthÔÇÖÔÇØ he adds. In the period where the currency went from ├óÔÇÜ┬╣56against the dollar to ├óÔÇÜ┬╣60, Manghat says their remittance volume grew around 20 per cent. Mr.┬áPromoth Manghat and surendran outline how many are taking advantage of the eroding rupee to borrow money in the countries in which they reside to invest it at home, be it in high-yeild accounts or bonds, or to take out loans or mortgages.

Mr. Promoth Manghat admits that while the depreciating rupee can yield higher value, Indians at home and abroad ÔÇ£would like to see our currency do wellÔÇØ. However, ÔÇ£├óÔÇÜ┬╣57-59 is a very good level to remit,ÔÇØ he says. Still, the future trend of remittances depends on the movement of the rupee, so it could be a bit of a gamble for those who want to get the best bang for their buck, so to speak.


For more information, visit www.uaeexchange.com


Posted: August 5, 2013
By: Mansi Mehta | Business India


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