The non-resident Indian (NRI) community in the Gulf region seems to have struck a goldmine after the steep fall in the Indian rupee since May this year. The 25 per cent fall in the value of the currency is even tempting NRIs to take loans at cheaper rates in various Gulf countries and remit the money to India to take advantage of the depreciation in the rupee value.
Take the case of Biju M, based in Kuwait, who recently sent around Rs 3 lakh of borrowed money to his non-resident external (NRE) account in India. “After the fall in the rupee value since May, I get more rupees on conversion. Moreover, interest rates are higher in India when compared to Kuwait. Besides, I need money for construction of a new house. The rupee has even fallen against the Kuwaiti dinar from below 200 to over 240,” Biju said.
According to State Level Bankers Committee (SLBC) data, remittances to Kerala, which receives the maximum NRI money in India, have crossed the Rs 75,000 crore in the first five months of the fiscal as against Rs 60,000 crore at the end of last fiscal. “It’s double advantage for NRIs. They get interest rate of 9-10 per cent in India. Secondly, on conversion they get more rupees in their account in India. They could be taking loans to bring to India and make more money out of it. If this continues, our bank will see a 45-50 per cent jump in NRI remittances this year,” said A Surendran, Head - Retail and International banking, Federal Bank.
Interest rates are comparatively low in the Gulf region. The benchmark rates in Kuwait and Saudi Arabia are 2 per cent, Qatar 4.50 per cent and UAE 1.36 per cent. “It’s a good arbitrage for NRIs. The NRE account offers two-way fungibility, which means there are no restrictions for transferring the money from the NRE account to the foreign account. Most NRIs are using this route to remit money. Besides, under the FEMA (Foreign Exchange Management Act), there’re no curbs on remittances to India under the NRE or NRO accounts, which are maintained in Indian currency and can accept remittances in foreign