KOLLAM: In an interesting trend, domestic bank deposits in Kerala have been growing faster compared to NRI deposits. Between 2019 and 2024, domestic deposits grew by approximately 73% — from Rs 3.03 lakh crore to Rs 5.25 lakh crore — while NRI deposits increased by just 42.6%, from Rs 1.90 lakh crore to Rs 2.71 lakh crore.
According to economists, the slower growth rate in NRI deposits reflects evolving migration patterns, global economic uncertainties and a growing preference for investments outside traditional bank deposits.
“The slowdown in the growth of NRI deposits in Kerala shows that more people are looking for long-term investments in foreign countries. These include countries like Australia, the US, Canada, European countries and the Gulf,” said S Irudaya Rajan, former faculty at the Centre for Development Studies and Chairman of the International Institute for Migration and Development.
“Student migration is a major reason for the drop in NRI deposits. Around 90% of students who go to the West for studies do not return. Their families are now choosing to invest abroad rather than in India or Kerala,” he said.
Economist V Nagarajan Naidu, former head of the economics department at Government University College, Thiruvananthapuram, also attributed the trend to the growing shift among NRIs towards Foreign Institutional Investments such as mutual funds, pension schemes, stock markets and bonds.
“NRIs now prefer shares and bonds over fixed deposits in Kerala. The interest rate on NRI deposits is no longer attractive. Two decades ago, Kerala was a preferred location for NRI investments, but that trend has reversed,” he said.
Slowdown in NRI deposits evident in post-Covid yrs
The Kerala Economic Review released in February noted that while NRI deposits were once a significant driver of bank growth, domestic deposits have now overtaken them in both volume and growth rate.
The slowdown is particularly evident in the post-Covid years. Between 2022 and 2023, NRI deposits grew by a mere 1.1%, increasing from Rs 2.38 lakh crore to 2.41 lakh crore. In contrast, domestic deposits rose by 11.8%, from Rs 4.27 lakh crore to Rs 4.78 lakh crore during the same period.
Godwin S K, professor at the Government College for Women, Thiruvananthapuram, said the pandemic had a severe impact on Kerala’s NRI economy.
“Covid was catastrophic for the global economy. Many Keralites lost their jobs or saw stagnant wages. This directly affected NRI deposits in Kerala. However, with economic recovery globally and model development initiatives in Kerala, there is hope that NRI deposits will bounce back,” he said.
According to a source with a nationalised bank in Kerala, a growing number of Non-Resident Keralites have started shifting their deposits from traditional NRI fixed deposits to mutual funds and other financial investments.
“Earlier, fixed deposits were considered the safest and most preferred option. But as awareness about market-linked investments grew, more NRKs became willing to take calculated risks. This shift in preference is one of the key reasons we are witnessing a slowdown in the growth of NRI deposits,” the source told TNIE.