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Banks bet on booming remittances

India receives the largest amount of remittances in the world - over 10% of the $230bn global market, according to World Bank numbers.

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MUMBAI: With an increasing number of Indians living abroad, either for work or having settled there, foreign exchange remittances into the country is likely to increase, market players say.

India receives the largest amount of remittances in the world, “getting over 10% of the $230 billion global market, according to World Bank numbers,” says Manish Misra, ICICI Bank’s head of global remittance. He expects the business to grow 15-20% annually in the next 4-5 years.

“It is inevitable that, with the need for overseas workers, India will remain a big market for the remittance business,” Misra says. The bank’s remittance service, Money2India, has a 22% market share in the Indian business.

“According to some estimates, the remittance market is expected to grow to $26-27 billion by 2006-07,” adds Anand Kute, head of marketing of online remittance company, remit2india.

The United States and Saudi Arabia are the largest sources of workers remittances to developing countries. Analysts expect that, in the next five years, Asia will be the top destination for Indians willing to migrate abroad.

“The region will become a powerhouse because of the economic boom here and the development in science and technology,” Misra explains.

Besides the Gulf, US and UK, Australia, New Zealand and Canada are also fast catching up because of the need for skilled labour there.

Out of the $23 billion, that comes into India, an estimated $8-9 billion comes from US, and the next highest is from the Gulf. India accounts for over 20% of remittances into developing countries. China received $21 billion of remittances.

Preliminary figures in the RBI annual report for the year ended June 2006 show that non resident Indian deposits were the third largest contributor to the total capital flows in 2005-06.

NRI deposits are expected to make up 11.3% of the total $24.693 billion capital inflows in 2005-06, behind portfolio and foreign direct investments at 50.6% and 31.1%, respectively.

For remitting money, the cheque/draft route is still the most popular. Exchange houses are also a popular means of transferring money, especially from the Gulf.

Some agencies such as Cash2India and Western Union Money Transfer deal only in remittance services. Several Indian banks also offer remittance services in alliance with foreign banks such as Citibank and HSBC.

Kute is confident that the online market will grow in the next few years as people get familiar with computers and the initial apprehensions about transferring money online vanish.

There are also unofficial channels (as hawala) used to transfer money which the RBI is keen to track down.

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