India Dispatch: Indians in the UAE sent more cash home this year as they took advantage of the weak rupee and higher interest rates.
Weaker rupee means more cash sent home
Indians in the UAE sent more cash home this year as they took advantage of the weak rupee and higher interest rates.
The UAE Exchange has reported a 10 to 12 per cent increase in the volume of remittances sent to India this year compared to last year.
"The [Indian] banks were offering very, very attractive fixed deposit rates - almost 9.5 per cent interest rates," said Y Sudhir Kumar Shetty, the chief operating officer for global operations at UAE Exchange, which has more than 120 branches and employs 3,000 staff across the Emirates. "That attracted a lot of bank deposits from middle and upper segments of societies."
The rupee has weakened sharply against the US dollar compared to last year. The dirham is pegged to the dollar, which means that a dirham buys more rupees.
"For the blue-collar workforce, because they could get more rupee, they have sent more rupee to maintain their family back home," said Mr Shetty.
"So this is where the two together - the extra amounts that were put across into the hands of the families by the low paid workers, the middle and upper classes remitting money for keeping bank deposits which give very attractive interest rates has resulted in real growth in remittances compared to 2011."
Xpress Money has reported a 25 per cent increase in total remittances to India this year.
"The guys who impact the volume are the high net worth customers," said Sudhesh Giriyan, the head of Xpress Money.
"They invest in fixed deposits in India because the fixed deposit interest rate is at 9.5 per cent, an all time high," he said. "It's very, very lucrative to put money into banks and convert the money into deposits. Besides that the real estate is still booming in India and people are buying homes. So these are the two areas where most of the money is going from the high net worth customers. The weak rupee is definitely helping the cause."
India, which is the world's largest receiver of remittances, is expected to get a record US$70 billion (Dh257.11bn) in remittances this year, according to a recent estimate from the World Bank.
About 30 per cent of remittances to India come from the GCC, according to Mr Giriyan.
He adds that he expects the rupee to remain under pressure over the coming months and therefore expects the positive trend to continue.
Mr Shetty agreed. "The other factor for remittances to go up is the number of projects coming up in the GCC," said Mr Shetty.
UAE Exchange hopes to add up to ten more branches this year.
Rising prices in India mean that it is becoming increasingly expensive for workers to support their families, Mr Shetty points out.