by Moiz Mannan
Desperation to raise funds in tight market conditions is making banks in Indian – in public and private sector – to devise new products and roll out special facilities for non-resident Indians (NRIs), especially the wealthy ones.
Last year, once again, overseas Indians made their country the world’s leading recipient of remittances, sending in around $70bn, according to the World Bank. A large proportion of this was remitted by Indian expats in the Gulf.
There has been a perceptible change in the character and composition of Indian migrants to the Gulf over the past few years. Not in absolute, but in comparative terms a larger number of professionals as against blue collar workers are now making their way out of India. Most of these professional are young and single with little or no financial liabilities.
The Sixth Pay Commission implemented for government employees has found the pensions of parents in many such cases rise to the extent when their non-resident son or daughter need not support them. The young professional is also aware of the investment avenues and does not, as a rule, squander money on luxuries.
All this is not lost on the Indian banks who at the moment are battling with a host of issues in a tight market. According to Reserve Bank of Indian (RBI data, money supply has seen a lower rate of growth in the past year, at 13.3 percent. Deposit growth has also been slow at 14 percent as has been the credit growth which dropped to under 14 percent. As compared to this, money supply rose at over 20 percent in 2007-2010 and was growing at over 15 percent until 2011-12. The growth rate of deposits between 2008 and 2010 was at over 20 percent.
Reserve money and money supply growth rates peaked in September-October 2013. Experts feel that this was probably owing to the RBI allowing swap deals to boost reserves at that time. RBI encouraged banks to get non-resident Indians to make deposits in foreign currencies which it took to give rupees to banks. Despite that boost, money supply has grown slowly in 2013-14. Further, the banking system has been adversely affected by bad loans (non-performing assets) and restructuring requests from corporates.
Interest rates, obviously play a significant role. When interest rates are low, banks are better able to sell loans and thus boost business. At this point the rates are high, but many believe that as inflation starts to decline, so will the interest rates. One of the main reasons for the significant drop in banks’ deposits rate has been the high inflation that eats into returns.
Experts are hesitant at the moment to take any guesses because of the rather negative forecasts so far for the 2014 monsoon. Weathermen are seeing a 65 percent chance of El-Nino and have forecast a below-par monsoon. In that case, food inflation could force the central bank to raise rates again.
In the wake of this, banks are thinking of ways to battle the conditions. Dena Bank, for example, recently started offering a higher rate of 9.15 percent for 444-day deposits. State Bank of India (SBI), the largest government bank, as well as ICICI Bank, the largest in the private sector, both offer a maximum of 9 percent rate on deposits for similar periods.
SBI’s associate the State Bank of Bikaner and Jaipur has started operating one of the country’s most luxurious banks for NRIs and wealthy residents. Jaipur-based Kohinoor Royale Banking Centre is a specialised Branch, where the accounts shall be opened only by invitation. It has a five star ambience with ultra modern facilities. The Branch has a plush lounge named Deewane Khass, which consists of Rajkosh, the locker facility, Shringar, the dressing room, and Darbar, a conference room with video conference facility apart from personal business centers, cafeteria, and most comfortable sitting arrangements. The lounge has both music and TV channels for the entertainment of visiting customers. Video chatting facility has also been introduced for the first time.
According to a Daily Bhaskar report from Jaipur, the account holders in the bank are Bollywood celebrities, cricketers, former royal family members and NRIs. Besides offering amenities matching a 5-star hotel this bank also provides forex facilities.
The private sector giant ICICI Bank recently opened two more branches in Thiruvananthapuram in Kerala to offer, among other facilities, specialised services for NRIs.
Pan India, ICICI Bank has launched two new saving account products — NRI Pro and NRI Premia — for NRI customers. In addition to offering regular savings account benefits, the NRI Pro savings account offers NRI customers value-added features such as priority service, preferential rates on money transfers and banking benefits for family members based in India.
The NRI Premia savings account will offer all the benefits of a NRI Pro savings account along with access to a dedicated relationship manager to take care of the customer’s banking needs, and a travel insurance bouquet which includes air accident coverage of up to Rs 1 crore. NRI Premia customers will also get to experience special privileges in the form of 24 X 7 concierge programme that gives them access to reservation assistance as well as preferential pricing on dining, travel bookings, golf courses, spas and special events across the world.
And then, it is not just the larger banks that are eyeing NRI business. The Mysore-based Kaveri Grameena Bank (KGB), a regional rural bank sponsored by State Bank of Mysore, has announced plans to introduce net banking and NRI accounts and mobile banking to its customers.
The bank operates in the districts of Mysore, Hassan, Tumkur, Bangalore Urban, Bangalore Rural, Ramanagar, Chamarajanagara, Mandya, Chikmagalur and Kodagu. About 310 out of 400 branches are spread in rural areas.
The Peninsula
