Kerala NRI funds rise, but tide may turn say bankers

THIRUVANANTHAPURAM: For the banking sector in Kerala, which depends substantially on expatriate Keralites for their funds, there has been reason for cheer in the first half of the current fiscal.

Non-resident deposits at the end of the first half of this fiscal touched Rs 31,585 crore, which reversed the declining trend in NR deposits that marked the previous year.

According to State Level Banking Committee statistics, NRI deposits in Kerala banks had first shown a decline in June 2007 and had continued to dip until March 2008, from where it has been edging up or remaining steady on a quarter-to-quarter basis.

However, banking circles here say that the picture could change when the full year figures come, owing to the financial crunch being experienced in the Middle East markets which form the cash cow for Kerala���s banking sector in terms of deposits.

Total deposits in the commercial banking system in Kerala crossed the Rs 1 lakh crore mark at the end of March 2008, touching Rs 1,05,488 crore. However, unlike in the past when NRE deposits accounted for nearly half of the total deposits, NRE deposits were only Rs 29,889 crore at the end of March 2008.



One reason for the recent uptrend in remittance is the depreciation of the rupee, which has led to an increased value of remittances. The fact that most of the Gulf currencies are pegged to the dollar has contributed to a corresponding rise in those currencies, in turn increasing the value of remittances to India.

Banking officials are, however, skeptical of how long the remittance boom will continue. Bankers here said the figures for the last months of this fiscal could determine whether the recovery in NRI deposits over the past year has been for good. They say that a significant dip in remittances, coupled with an exodus of expatriates from the Gulf countries could spell trouble for Kerala���s economy.

NRI deposits in Kerala banks (Rs cr)

Sept 06 Sept 07 Sept 08

Domestic 50,568 65,423 82,401

NRE 32,402 31,690 31,585

Total 82,970 97,113 1,13,986

(Source:SLBC)