Deposits, not remittances, may take a hit

MUMBAI: The debt crisis in Dubai may impact deposits by non-resident Indians (NRIs) more than remittances, given the higher share of deposits in overall inflows into India, according to bankers. Remittances are permanent transfer of funds to relatives back home, NRI deposits are re-patriable and are parked with Indian banks in depositors’ name.

India receives remittances worth $50 billion from its diaspora across the world, with the Gulf region roughly accounting for around 25% of such inflows. Besides, inflows through various NRI deposits have been close to $40 billion annually. Though there are no clear estimates on fund flow from the Gulf region, bankers reckon that between remittances and NRI deposits, more money is routed to the country in the form of deposits from Dubai and other countries in the Persian Gulf.

Top Indian government officials and the former governor of the Reserve Bank of India YV Reddy have been quick to rule out any adverse impact on remittances. According to Rupa Rege Nitsure, chief economist Bank of Baroda, “Most migrants are semi-skilled workers who would want to build up savings and hence would want to send back their savings as deposits. Moreover, for those who have gone to the Gulf with a prior loan burden, NRI deposits come handy.”



Economists feel it is too early to guage the impact of the crisis on remittances and NRI deposits, considering that there was hardly a ripple on this front during the credit crisis last year. However, what is distinct with respect to migrants in the Gulf compared to say Europe and USA, is that Indians seldom settle there permanently unlike in Europe and USA. In the event of jobs being cut, it is quite likely that migrants from India may transfer their entire savings to their home country.