NRI remittances touched the magic
figure of USD 24.1 billion in 2005-2006, making India the
largest recipient of personal money transfers in the world.
Remittances and flow of funds from migrant workers to India is
a key resource in its emerging economy. Remittances from NRIs
and the deposits maintained by them form a generous component
(about 23%) of our external reserves.
A working report by the RBI on the
cost of NRI remittances in May 2006 found that money flows are
determined by the economic health in the host country. The
dollars poured in from the Middle East workers in the 1980s,
but the source of remittances has now shifted to the West,
mainly the USA. This shift in source, says the study, has also
meant that growth potential for remittance flows has now moved
to traditionally high cost economies which will affect cost of
Currently, the Middle East
contributes to 35% of total inward remittances, followed by 30
to 35% from North America, 20% from Europe, and 10% from other
regions. The global remittance market is estimated at $110
billion, including India-bound remittances of almost $11
by the RBI on Remittances
RBI has advised banks to minimize costs of remittances by
reducing their charges at the domestic end and at the
has suggested an awareness programme through the banks' web
sites to encourage NRIs to use Indian banks or foreign banks
having branches in India to transfer money to India.
can affect the remittances in foreign currencies with
instructions for conversion into Indian Rupees at the Indian
end to get the benefit of a better exchange rate.
public sector banks can explore the feasibility of setting
up centralized remittance receiving centre, extending the
scope of real time gross settlement between banks in India.
The report proposes to dispense
with existing restrictions on the number of tie-ups by banks
with exchange houses and the number of drawee branches for
rupee drawing arrangements. However these relaxations could be
extended to banks only with sound risk management systems.
Remittance services offered by a
host of commercial banks or authorized dealers, and money
exchange service providers have speeded up money transfers
across borders. Technology (internet) has made cash transfers
possible in minutes. Extending the scope of existing
electronic transfer facilities would help bring down
remittance charges further.
On the other hand, the Reserve
Bank of India in November, 2006 announced a series of measures
to open up overseas investment by individuals.
limit for overseas remittance by resident Indians has been
doubled from $25,000 at present to $50,000 per financial
year. The amount could be used either for current or capital
account transactions or for a combination of both.
outbound remittances, the RBI has removed the lock-in period
for transfer of sale proceeds of immovable property in India
by NRIs and PIOs. However, the lock-in is eliminated
provided the amount being remitted does not exceed $1
million in any financial year out of the balances in their
non-resident ordinary (NRO) accounts.