KOCHI: Even as the crisis in West Asia fuels concerns, Kerala-based banks say remittance inflows from the Gulf remain resilient for now, offering short-term relief to the state that depends heavily on overseas income.
The US-Iran conflict and the related developments are being closely watched in Kerala, which accounts for nearly 19-20% of India’s total inward remittances and has one of the country’s largest expatriate populations in the Gulf. Any prolonged disruption in the GCC economies could have far-reaching implications for household consumption, real estate, banking deposits, and the state’s broader economy.
Speaking during the fourth quarter earnings call of Federal Bank, managing director and CEO K V S Manian said remittance flows continue to remain elevated despite the geopolitical situation. “Unless you see significant job losses and Indians returning for good to India, I don’t think this story is likely to change immediately,” he said. “As of now, we are seeing positive trends.”
According to him, even in the event of a de-escalation, reconstruction activity in the region could sustain labour demand and keep remittance flows robust. Drawing parallels with the post-pandemic period, he noted that the Gulf economies had weathered disruptions earlier too without causing a prolonged collapse in remittances to India. Federal Bank executive vice-president and country head for retail liability and fee products, Joy P V, said remittance volumes across all GCC corridors remained strong despite the volatile situation.
“The current situation in West Asia has introduced a degree of uncertainty; however, remittance volumes so far have remained resilient,” he said. “Across all GCC corridors — UAE, Kuwait, Oman, Qatar, Bahrain and Saudi Arabia — remittances in March and April were higher than in February,” he said.
‘No visible signs yet of moderation in biz activity’
Federal Bank processed around Rs 2.74 trillion in non-resident remittances during the last fiscal period.
Joy said there were no visible signs yet of moderation in business activity. “While there are reports of lower economic momentum, it has not yet translated into any visible moderation in remittance flows or business,” he noted.
According to him, many expatriates are choosing to send money home earlier than usual as a precautionary measure.
“Some customers are advancing or consolidating remittances amid evolving regional conditions, a trend observed across both retail and HNI segments,” he added.
Similar trends are visible at other Kerala-focused lenders as well. ESAF Small Finance Bank executive vice-president Sudev Kumar V said remittances initially surged after the crisis, intensified because of panic-driven transfers.
“There was an increase in remittances during the initial period of the crisis because of the perceived uncertainty and resultant panic reactions. But that has subsided now,” he said. “People are maintaining confidence in the economies of the Middle East countries. Also, favourable exchange rate is a driver,” he said.
In its latest bi-monthly monetary policy statement, the Reserve Bank of India warned that weaker global growth prospects could dampen external demand and reduce remittance flows.
The central bank noted that India’s inward remittance receipts rose 5.1% year-on-year to $37.8 billion in the third quarter of FY26. During April-December FY26, net remittance receipts increased 11.3%.
The crisis assumes significance for India because West Asia accounts for nearly two-fifths of the country’s inward remittances. The region also contributes around one-sixth of India’s exports, one-fifth of imports and nearly half of crude oil imports.
Indian inflow up 30-35%
Remittances to India saw a spike after the conflict intensified, with inflow from West Asia rising by 30-35% in March 2026, according to a recent report by SBI Research
The report cautioned that flows may stabilise in the $135-137 bn range in FY27 as full economic impact of West Asia crisis unfolds
Spike attributed to “risk aversion” among expatriates and fears of worsening tensions or possible evacuations.
SBI Research expects remittances to touch an all-time high of $137-140 billion in FY26
