RBI eases rules for inward remittances further

The Reserve Bank of India (RBI) on Friday increased the number of remittances a single individual beneficiary can receive in a calendar year to 30 from 12.

The move is expected to boost remittances to the country in a big way.

Indeed, coupled with the depreciation in the rupee and an increase in the number of white-collar migrants to other countries, this will ensure inward remittances log at least $70 billion during 2012, say experts.

To be sure, remittance flows into India amounted to $64 billion in 2011, compared with around $58 billion the previous year, according to World Bank’s Migration and Development report, published in April.

“An upward revision to flows to India in 2011 (by $5.8 billion) is primarily due to a weak rupee and robust economic activity in the Gulf Cooperation Council countries, which are major destinations of recent migrants,” the report said.

This means India continues to lead the pack of developing countries receiving remittances.

Of the total $64 billion worth of remittances, about $14-15 billion was through cash-to-cash methods, where customers send across cash directly in the hands of the recipient. From the total cash-to-cash flows, Xpress Money was responsible for about 10%, said Giriyan.

Money transfer companies play largely in the cash-to-account business, where customers send money to the bank account of the recipient.

Most in the business are betting on a robust 2012 too.

“Non-resident Indians as a community have a tendency to save, because of which they will always send across money to their families through remittances. Over and above this, the rupee devaluation has helped a lot,” said Sudhesh Giriyan, head, Xpress Money Business, a global money transfer company.

Harsh Lambah, senior regional director for MoneyGram International for South Asia, concurred. “There are more professionals migrating to foreign countries and there has been an increase in government to government contracts. Moreover, people now prefer moving their money through formal means rather than informal and illegal means like hawala,” he said.

According to experts, white collar professionals are also increasingly borrowing money from banks in their country of work and sending it to the accounts of the recipients in India. This is largely to take benefit of the falling Indian currency and it doesn’t hurt much because the interest rates in developed nations are much lower than in India.

NRI deposits also saw a surge last fiscal, thanks to the deregulation of rates by RBI.

For all that, the momentum on NRI deposits in the latest leg of rupee fall was weaker compared with December, when it had gone from 50 to 54, said Rajat Monga, group president- financial markets and chief financial officer, Yes Bank. “It was also because the deregulation had just happened (in December).” The local currency fell to 50 in January and has gone on to breach 56 late last month.

As for the risks to remittances, experts cite exchange rate volatility, persistent unemployment in Europe and the US, coupled with difficult immigration rules and uncertainty about the direction of oil prices.