The weak rupee is seeing strong foreign exchange inflows into Kerala, with remittances from over two million Keralites living abroad set to touch around Rs 75,000 crore this financial year.

However, the rate of growth of remittances when the rupee was between 60 and 65 to the dollar has been slower than when the rupee was 55-60/$, notes Shyam Srinivasan, Managing Director and CEO, Federal Bank.

Srinivasan should know, since the bank channels around 7-8 per cent of the country’s forex remittances. “Last year, around $68 billion came into the country and we brought in $5.3 billion,” he says. In the Kerala market alone, Federal Bank channelled Rs 32,000 crore of forex, including trade remittances.

First peak

Srinivasan’s explanation for the relatively lower inflow of remittances is that the diaspora thought the dollar was peaking at 55.

“The first peak was at 55 and then there was a lull. At the second peak (over 65), incremental remittances have been relatively lower because everyone topped up on their borrowings earlier to send it here. Also, this is peak NRI travel season, so they don’t have that much disposable cash now.”

While he expects remittances for Federal Bank to jump at least by 45 per cent this year, he says that alone does not mean much. “We are an important pipe (for the funds), but it helps the local economy and, of course, the consumption also helps us. Normally, around 17-18 per cent of the remittances stays back with us as deposits,” explains Srinivasan. But he and his team at Federal Bank are working to give customers enough reason to deposit money in the bank or use its services. “Every bank is giving the highest rates possible; it’s very competitive.”

Customer service

With nothing to distinguish banks other than interest rates, what works best for Federal Bank’s clients, he explains, is to be able to get a better home loan or some concierge services from the bank.

“Some of our premium clients may not have very much in terms of local logistic conveniences. So if they are flying from Kottayam to Dubai, if the flight is at 4 a.m. and if they need a place to relax for few hours, we have a guesthouse adjacent to the airport near Kochi where they can get two-three hours of rest. These are not tangible benefits, but this is what bonds these customers. In Kerala, we are able to serve customers this way,” explains Srinivasan, emphasising the need for some out-of-the-box thinking for the bank elsewhere.

While Federal Bank is among the biggies in the Kerala market, its rate of growth in non-resident remittances is also strong and growing fast. Its focus is also now on the Tamil Nadu, Punjab, Gujarat, Mumbai and Karnataka markets which are the top States for inward forex remittances.

“We want the non-Kerala markets to contribute incrementally more, but Kerala will be the bedrock as the base is much larger,” he adds.

>vinay.kamath@thehindu.co.in

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