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by Moiz Mannan
As the international money transfer business continues to evolve, more players are entering the non-reisdent Indian (NRI) segment with newer facilities to offer.
During the worst days of the global economic crisis, Indian expats in the Gulf may have outdone their compatriots in the US when it came to remitting money home, but now, as things are easing, money transferers seem to be focusing on America.
This August alone, at least two major India public sector banking entities launched online remittances services for overseas Indians in the US.
Simultaneously, the Western Union Company, a global leader in money transfer services, recently announced a tie-up with Bandhan, one of India’s leading microfinance companies.
The arrangement is likely to benefits all those NRIs whose kith and kin reside in rural areas.
Just over a week back, Punjab National Bank, launched ‘PNB NRI REMIT-India’, an online cross-border remittance solution to send money from the US to India. The bank has launched the online cross-border remittance solution in association with The Bank of New York Mellon, New York.
Besides, the bank also launched RET AD, an online reporting system meant for bank branches authorised to deal in foreign exchange.
Earlier in August, another public sector lender, the Central Bank launched an online remittance service CentFast2India.com for NRIs in US.
To begin with, the maximum amount per remittance has been fixed at $5,000. The facility allows funds transfer by remitters in the United States to beneficiaries in India through internet banking from any bank account anywhere in the US to any account in India.
HSBC Bank was offering free remittance services from USA and Canada. ICICI Bank has tied up with the Wells Fargo Bank for Indians in the US to send money directly from their Wells Fargo Bank accounts to their beneficiaries’ ICICI Bank accounts. IndusInd Bank has tied up with the Bank of New York to offer online remittances.
Citibank has launched Citi Online Remit an online money transfer service for NRIs to send money to India from United States using any US Bank Account or Credit Card.
The money transferred can be received in India through demand drafts or direct account credits. India’s largest public sector banker, the State Bank of India, offers SBI Express Remit, used for fund transfers to India from the US/ the UK with round-the-clock services without visiting any branch/ bank.
According to a survey recently released by the Reserve Bank of India (RBI), North America continues to be the most important source region of remittances to India (about 38 per cent of the total emittances), while the Asian region (the Gulf and East Asia) contributes about 32 per cent.
Remittances from the Gulf provide a special case for economic development, as they look and feel fundamentally different from their European and North American counterparts.
Indian expats in the Gulf countries send smaller amounts, in more frequent intervals, than remitters elsewhere. Remittances sent from the Gulf are, on average, two-thirds the size of those from other regions of the world, and in some cases, are sent with twice the frequency.
The biggest implication of this, according to the RBI, is for the utilisation of funds. Larger sums of money sent at more sporadic intervals are more likely used for investment purposes.
Conversely, smaller and more frequent remittances are more often used for consumption. Indeed, more than 60 per cent of remittances to Mumbai in Maharashtra and to Kochi in Kerala – two historically important hubs for Gulf remittances – are used for “family maintenance”.
The oil boom-induced Gulf migration in the early 1970s is when efforts at attracting inflows from Non-Resident Indians (NRIs) began. Since then financial remittance has emerged as an important part of India’s balance of payments.
Remittances were virtually negligible in 1970, rose to $2.8bn in 1980, stagnated during the 1980s and even dropped slightly to $2.4bn in 1990.
Since then they have climbed steeply to $11.1bn in 1999 and over $50bn — nearly 5 percent of GDP — in 2009.
If the migration of Indian workers to the Gulf states was the dominant story of the 1970s and the 1980s, the migration of information technology (IT) workers, principally to the United States, has been the trend since the mid-1990s.
Indian migration to the United States doubled in the 1990s, mostly through the use of H-1B temporary worker visas, which allow those in specialty occupations to work in the country for up to six years with the possibility of receiving permanent residence.
Indian software engineers became an important element of the US IT boom.
According to 2007 RBI estimates, 44 percent of remittances originated in North America, 24 percent in the Gulf region, and 13 percent in Europe.
In contrast, studies show that in 1990-1991, 40 percent of the remittances came from Gulf countries and 24 percent from North America.
Indian banking officials believe the shift began in the late-1990s, with North America solidifying its dominance in 2002-2003.
However, a more recent RBI survey (November 2009) found that the share of remittances from the Gulf regions grew during the global economic crisis in 2008-2009 and declined from North America and East Asia.
The proportion of remittances from North America declined to 29% in 2008-2009 from 33% in 2007-2008, while those from the Gulf grew to 31% from 29% during the same period.
Trends clearly show that while the Gulf expat may have temporarily overtaken the one in North America, it is the latter that Indian banks appear to be focusing on at the moment.