The NR Eye: Indian banks excited as NRI remittances soar

Thursday, 06/09/2012

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Banks in India are drooling over the recently released official numbers showing a 50 per cent jump in dollar inflows from non-resident Indians (NRIs) and have started to line up schemes and incentives to make the most of it.

If the trend picks up, overseas Indians will have some attractive options sooner than later.

Data from India’s central bank, the Reserve Bank of India (RBI) indicates that the Non-resident (External) Rupee or NRE accounts saw an inflow in this April-June quarter that was nearly four times that in the period last year. In figures, the deposit inflow stood at $7.4bn during these three months.

The jump has mainly been caused by a combination of favourable factors such as a fluctuating exchange rate, higher interest rates offered by Indian banks and liberalized remittances norms.

Significantly, one major hurdle that had recently threatened to spoil the party has disappeared. Last month, non-resident Indians, particularly the low and middle income workers in the Gulf, were startled to know of a government decision to levy a 12.36 per cent service tax on remittances sent home.

Senior political figures, leaders of the major manpower exporting states and various NRI groups joined in the chorus of protests, resulting in a revocation of the move. The government has now clarified that such a charge would not be recovered from the overseas Indians.

It may be mentioned here that in December last year, the Indian government deregulated the interest rates offered by banks on NRE deposits. Public sector giants and as State Bank of India and private majors such as HDFC Bank were among the first to hike their rates. Rupee term deposits have been yielding between nine and 9.50 percent interest for varying tenures.

Earlier this week, HDFC Bank, India’s second largest private sector bank, launched a “One Family, One Bank, Zero Balance” account for NRIs and their families.

The zero balance account will be available to resident family members of NRI’s who open NRE & NRO accounts with HDFC Bank on or before September 15, 2012, and introduced the offer in Kerala to mark Onam. NRIs will thus have the option to transfer funds to the account of a relative back home without any hassles.

According to media reports, the offer is currently available only in Kochi city branches and later extended to other regions in the state.

In Mangalore, the Corporation Bank launched a festival bonanza on Wednesday for various loan schemes. The special products include Home Loans, Vehicle Loans, NRI Home Loans, Doctor Plus (Finance for Medical Professionals) and Vyapar Schemes (Loan for Trade & Business).

For example, housing loans are being offered at an interest rate of 10.50 percent for amounts up to a  million rupees. A five-year vehicle loan would come at 11.25 percent.

A special home loan scheme for NRIs can be availed for purchase of ready built house/flat, for construction of house in pre-owned land, for purchase of land and construction of house thereon and for takeover of housing loans from other banks/institutions, originally sanctioned for the above purposes.

According to media reports, NRIs will be given special treatment “Green Channel” facility for priority sanction. The rate of interest for all tenures and for amount up to `5m is offered at 10.50 per cent; for amount upto `10m at 10.75 percent and for amounts above `10m at 11 percent. The processing charges are fully waived.

Another south-based lender, the Federal Bank, is looking for an increase of up to 30 percent in remittances this year. According to a PTI report, Federal Bank accounted for 7.5 percent of all the NRI remittances last year.

The report spoke of the bank’s plans to open a branch at the Dubai International Finance Centre and a representative office in Dubai.

In Kochi, Muthoot Finance, which claims to be the second largest player in the country among the money transfer companies, is enthused about the doubling of its payouts this fiscal. It is offering assured gifts to all its money transfer customers in Kerala during the Ramzan and Onam season.