The free fall of the rupee against the US dollar has led to a sudden spurt in remittances to Kerala from Malayalees working abroad, especially the Arabian Gulf, even as the State Government is worried about the additional burden the situation has brought upon it as far as loan and interest repayments are concerned.
A minimum of Rs 1,000 crore had been repatriated to Kerala from the Gulf by the Malayalees there in the past three days which was more than double the normal remittances, according to major banks in the State. Experts said the trend would remain as long as the rupee nose-diving continued. The annual foreign remittances to Kerala have been estimated as Rs 55,000 crore.
“There has been increased activity at the money exchange institutions in the Gulf,” said Babu P, executive of a Kerala-based scheduled bank. “Money is just flowing into the Kerala banks as Malayalees in the Gulf are trying to send as much money as possible in the new situation,” he said, adding that the money flow into his bank had more than doubled in the past three days.
Bankers in Gulf cities like Dubai, Sharjah and Doha said that Malayalees were showing increased interest in sending as much money as possible money to their home State. “The past one month had seen a 50 per cent increase in repatriation of money from Gulf but there has been a 100 percent increase in the past few days,” said Sree Kumar, a banker based in Dubai.
Sree Kumar said that Malayalees were cashing in on the situation to the maximum extent possible by sending money home availing loans and even by selling their apartments. “It is logical and natural. If you get Rs 8,000 more than what you would have got while repatriating $1,000 three months back, why won’t you do itIJ” asks Sree Kumar.
He says the middle class Keralites in the Gulf have been crowding the banks there for loans so that they could send home as much money as possible to cash in on the free fall of the rupee. “They are selling everything they think is not inevitable the Dirham, Kuwaiti Dinar and Saudi Riyal are acquiring more value with respect to the rupee,” he says.
At the same time, the free fall of the rupee is giving nightmares to the Kerala Government’s Department of Finance as loan repayment and interest burdens keep increasing in the new situation. The State’s debts are mainly from the World Bank and Asian Development Bank and most of them had been taken when the dollar’s value had stood at around Rs 40.
Finance Minister KM Mani said in Thiruvananthapuram on Tuesday that the rupee fall had created serious financial problems for the State. Hoping that the Reserve Bank would intervene in the market to shore up the rupee value and to stabilise it, he said increasing production was a must in the current situation.
As per the Budget estimates, the State has to find Rs 7,673 crore for paying interests on loans alone in 2013-14. This would be Rs 8,736 crore next year and Rs 9,852 crore in 2015-16. These estimates are based mostly by keeping the dollar value as Rs 40 and Rs 50 but the burden would be far heavier if the rupee stayed at the present levels for long, say experts.
“Such a situation would be unbearable for a State like Kerala which spends most of its revenues to pay salaries, pensions and interests. It is a tricky situation. Just think of taking loans to make repayments and to pay interests! The State would be in deep trouble soon as the repayment period for many loans are set to start,” said a former State Planning Board member.