KOCHI: The NRI deposits at banks in Kerala have shown a robust growth of 14 per cent at the end of December 2020, defying predictions of a slowdown due to COVID and resultant job losses. As per statistics, the deposits stood at Rs 2,27,430 crore (over Rs 2.27 trillion) on December 31, 2020 - a 14 per cent growth from Rs 1,99,781 crore on December 31, 2019.
However, the growth stood at 2 per cent when compared to the September 2020 figure of Rs 2,22,029 crore, data available at the State Level Bankers Committee said.
The NRI deposits should not be confused with remittances, which are foreign currency funds sent by the expatriates to families and relatives for maintenance and upkeep. NRI deposits are foreign currency deposits made in a bank in the country by a non-resident Indian, which can be repatriated on maturity.
"What could be happening is that the NRIs who are returning to India after job losses or retirement may be depositing the entire remaining savings in their NRE (non-resident external) accounts in India, where the earnings are not taxed," said Mathew Thomas (name changed), who retired and returned last year.
Interest earned through an NRE account is exempt from tax. "Though you are supposed to convert your account to resident status immediately after your return, most people continue with the NRE account as they may be looking for a new job and return overseas soon," he said.
The advantage of an NRE account is that it has high liquidity and allows for full repatriation of funds from the account to the NRI’s country of residence when required.It is estimated that about 15 lakh non-resident Keralites may have returned to the state in the last two years due to the pandemic.
International Institute of Migration and Development Director KV Joseph reckoned the NRI fund flow to decline steeply in coming years, affecting the state economy.
"As a result of the Covid outbreak, retrenchment of a large number of expatriate workers became a fait accompli. The Gulf countries from where Kerala receives more than 80 per cent of remittances have recorded a steep fall in outward remittances primarily on account of the pandemic. Naturally, the state will get a much lower volume of remittances in the years to come," he said.
According to the World Bank's Migration and Development Brief report released last month, remittance flows remained resilient in 2020, registering a smaller decline than previously projected. Officially recorded remittance flows to low- and middle-income countries reached USD 540 billion in 2020, just 1.6% below the 2019 total of USD 548 billion. The decline in 2020 was smaller than the one during the 2009 global financial crisis (4.8%).