The economy booster

Despite the pandemic, NRIs in the UAE continued to send money home, leading to a boom in the economy


Nisthula Nagarajan

Published: Wed 7 Apr 2021, 12:00 AM

Last updated: Wed 29 Sep 2021, 6:40 AM

Inflows from overseas fuel huge levels of purchases and investments in India, boosting economic activities in these states, bringing increased tax revenues to the respective state governments to fund various welfare schemes.

Remittances to India from the Gulf region have been booming despite the economic turmoil created by the global pandemic, with many Indian banks reporting growth of up to 20 per cent.

The increase in non-resident Indian (NRI) remittances from April to July last year from the Gulf region, is said to be driven by two factors: a dip in rupee value as well as expat Indians rushing to move a part of their savings back home in the wake of general uncertainty.

The UAE tops the list of NRI remittances to India according to India’s Ministry of Overseas Affairs and is the second-biggest global market for outbound migrant remittances after the US before the Covid-19 outbreak, according to preliminary 2020 data in a study by Oxford Business Group and Al Fardan Exchange.

The trend has debunked widespread fears among economists and policy makers about a fall in the inflow of remittances due to widespread salary cuts and job losses.

In 2019, remittances to lower-middle- income economies (LMICs) reached $554 billion, the number overtook the total Foreign Direct Investment made in these countries. The top five countries with the highest remittances were: India with $83.1 billion, followed by China, Mexico, the Philippines, and Egypt. A World Bank report in April had projected a 23 per cent fall in remittances to India this year to $64 billion from the $83 billion in 2019.

Expat remittances from the UAE amounted to Dh79.6 billion ($21.6 billion) in the first half of 2020 with India being the top receiving country.

Many leading Kerala-based banks such as Federal Bank are among the banks which have seen positive growth in NRI remittances in 2020. Officials at many banks also revealed an increase in NRI remittances in the April to July period, compared to last year.

Federal Bank is a key player in the remittances business and it continues to gain market share in this important service. The bank’s continued focus on relationship management of existing remittance partners and tie-up with new partners has been instrumental in seeing the flow increase.


The digitalisation of the UAE’s remit- tance industry picked up in 2020 with many providers reporting exponential growth in money transfers through mo- bile apps.

The pandemic warped the speed of adoption for existing digital channels, shortening the uptake that would nor- mally take years into months, especially in the second quarter of this year.

Outward personal remittances rose 7.8 per cent to Dh41.4 billion during the first quarter of 2020, up from Dh38.4bn in the same period last year, according to the Central Bank of the UAE. This declined by 10.3 per cent in the second quarter because of movement restrictions. Outward remittances through banks rose Dh300 million.

Market analysts say the complete im- pact on remittances can be measured once the third and fourth quarter reports become available.

India was the top country for outward personal remittances during the second quarter with 34.3 per cent according to the Central Bank of the UAE. Remittances to various corridors have been affected by factors such as salary cuts, retrenchments and cancellation of flights.

While the pandemic hit remittance flows in the first half, many white-collar employees shifted to remitting money via digital platforms. At just under 5 per cent, South Asia was the least costly region to send $200 in the third quarter of 2020. The United Nations estimates the global digital remittance market to grow by 12.2 per cent to $36.2bn by 2027, up from $16.2bn in 2020.

Technological innovations, including mobile technologies, blockchain and digitalisation that accelerated during the pandemic, helped improve efficiencies.

Remittance has only evolved on two dimensions – how much does it cost to move money and how long does it take to move money. The quicker and the less expensive, the more remittances.

Federal Bank has noticed that during the pandemic, there has been an exponential increase in the percentage of remittances originated by its partners through digital means. Nearly 50 per cent of the remittances now reaching India originate via the web or mobile applications. The digital channel has largely replaced the traditional branch channel.


The consensus is that the rupee will not come under the sort of severe strain that was there during the March-July phase last year, when the lockdowns over the pandemic severely disrupted growth chances.

Once the Covid-19 vaccine is distributed widely in the UAE, the remittance industry stakeholders expect the sector to rebound in the first or second quarter of 2021.

With the government easing restrictions and implementing measures to stimulate tourism and other economic activities, there has already been a steady recovery in the foreign exchange and remittance sector.

The gradual recovery in global avia- tion traffic is also expected to create demand for remittances and money ex- change services as more people begin to travel for work and leisure, an Oxford Business Group report said. Another factor expected to boost remittance volumes in 2021 is the rapid adoption of mobile money transfers, with the UAE expected to play a key role, the report states.

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