Several banks in India have reported a sudden surge in remittances by non-resident Indians (NRIs), especially from the GCC countries, in the last few days, fuelled by a downward spiral in the rupee’s exchange value against the US dollar.
The Indian rupee traded at 75.05 against the US dollar as trading closed on Monday, lower by 187 paise, or 2.55 percent, from the previous Monday, posting one of its sharpest falls in the recent months.
Arabian Business reported earlier this month that the Indian currency was predicted to fall to 75 rupees for a dollar in the short-term.
Currency trading market in India remained closed on Tuesday and Wednesday on account of a regional festival in Mumbai – India’s financial capital – and a national holiday respectively.
Officials at some of the banks in Kerala, the southern Indian state which accounts for the largest chunk of NRI remittances to India from the Gulf region, said they have seen a sudden spurt in remittances from the GCC countries in the last few days.
“There has been a significant increase in NRI remittances to our bank in the last four to five days,” a senior official in charge of the non-resident cell of a leading Kerala-headquartered private sector bank told Arabian Business.
“The GCC countries account for 90 percent of NRI remittances to our bank, and the rest 10 percent from all other countries together,” said the official, who wished not to be identified because of compliance issues.
The banking official, however, said it was difficult to quantify the jump in remittances on a short-period basis in the absence of segregated data.
Officials at several other banks, who have also confirmed the sudden surge in NRI remittances, especially from the Gulf countries in the last few days, said they expect NRI remittances to continue at a higher level in the short-term as they anticipate the further fall in rupee exchange value against the greenback.
Forex experts said though there could be a slight pull back in the rupee’s value on an immediate basis because of expectations of intervention by the India’s central bank the Reserve Bank of India (RBI), several charts and several economic factors point to further weakness in rupee on the short-to-medium basis.
“The rupee may see another low of 76.50-77 level in the short-term because of increased liquidity in the Indian market due to the slated large-scale bond buying by RBI and the rising concerns of coronavirus infections in India casting a shadow on the projections of the country’s economic growth rates for the current fiscal year,” Ajay Kedia, managing director of Kedia Commtrade and Research, told Arabian Business.
Kedia said on the lower side, the rupee could see a support level at 74.50 against the US dollar.
According to currency traders, the Indian currency was being traded at 75.60 rupees to a dollar – even lower than its closing rate in India – on Wednesday on offshore currency markets in Dubai and Singapore.
Banking officials said while there is a sudden spurt in NRI remittances because of the current weakness in rupee value, banks have also seen a jump in fund repatriation by NRIs from their deposits in India.
“The reverse fund flow from India could be because NRIs who may have suffered losses in their businesses during the pandemic period or those who are in between jobs require money in the country they reside to tide over their financial problems,” an official in a public sector bank said.
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