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Image used for representational purposes only

Image used for representational purposes only (Express Illustrations)

KOCHI : While remittances sent to their home state continue unabated, non-resident Keralites (NRKs) are now avoiding traditional fixed deposits (FDs) and exploring better investment avenues.

In Kerala, banks are noticing a significant change in the saving behaviour of expatriates, who are increasingly favouring dollar-denominated instruments over previously popular FD rupee accounts. Bankers are acknowledging unmistakable signs of substantial shifts within the industry.

According to Federal Bank, which boasts the largest share of the remittance pool among private lenders in the country, there is a trend towards dollar-denominated products among customers.

Post Covid, there has been a noticeable change in customer preferences regarding currency and deposit tenure, said Joy P V, senior vice-president & country head, deposits, wealth & bancassurance, Federal Bank.

“Expatriates with migration and settlement plans are increasingly turning to dollar-denominated products to capitalise on higher interest rates compared to those in their country of residence, as well as to hedge against currency fluctuations. We have witnessed significant growth in the FCNR portfolio, in particular,” Joy told TNIE.

The migration and settlement patterns of expatriates are undergoing structural changes, driven by factors such as destination countries, purposes of visit, and economic opportunities, he added.

Anand Subramaniam, joint general manager & head, NRI business, South Indian Bank, emphasised that NRIs are increasingly diversifying their investment portfolios beyond traditional deposit options such as FDs or recurring deposits. The trend of transferring funds to Indian bank accounts has shifted towards investments in equity and mutual funds, said Hari Velloor, executive vice president at ESAF Small Finance Bank.

“Additionally, a significant number of individuals from GCC countries are choosing to maintain their funds abroad, investing in real estate and other ventures. The introduction of golden visa and long-term residency programmes by GCC countries has reshaped the mindset of NRIs. Furthermore, there’s a growing inclination among the youth to migrate to western countries, resulting in lower remittances to India,” he added.

Growth of bank deposits in Kerala

S Irudaya Rajan, chair of the International Institute for Migration and Development and former professor at the Centre for Development Studies (CDS), said he finds the trend unsurprising.

“It reflects the attitude of the new generation that is unlikely to return to India. Migrants to the Middle East returned to the state and thus deposited and invested in the state. The new breed of migrants are now heading to places like Canada and Australia, and have been observed selling everything, including ancestral properties, to settle abroad,” he added.

Anand observed that with investments being made at an accelerated pace and a shift towards non-bank products, there is increasing pressure on balances in NR savings accounts. Consequently, the growth in NR savings account balances may be subdued compared to deposit growth, he added.

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