Currently, an NRI can send a maximum of 12 transactions in a calendar year, each not exceeding $2,500, as per RBI norms. This amount may be raised to $5,000.
The legal channels available to NRIs to send money home will soon become more attractive with the Centre planning to double the amount per transaction allowed through money transfer operators (MTO) like post offices. Currently, an NRI can send a maximum of 12 transactions in a calendar year, each not exceeding $2,500, as per RBI norms. This amount may be raised to $5,000.
This will spread cheer, especially among low-waged NRIs, as high volume transactions are now out of the purview of the remittance business coming through this route. Since the charges for funds sent through the MTOs are far higher than for those sent through the banking route, doubling the amount per transaction will make life easier for low wage earning NRIs.
An RBI working group report on NRI remittances has found that the cost of sending money from the US ranges between $22 and $39 per transaction through MTOs. From the Gulf states, the cost is about $6 per transaction.
Policy mavens hope that upping the ceiling will clip the attractiveness of the hawala route for sending in money. The government is keen on revising the limits for remittances to curb the hawala route, a government official said. Though there are no official figures, experts estimate that a sizeable chunk of the total remittances to India could be through the hawala route.
The liberalisation could also mean a further push for the remittance business that touched $24.6bn in 05-06. As a percentage of the GDP for 05-06, the share of money being sent in by NRIs and others works out to 3.2%. India is the largest recipient of remittances in the world. The volume of the inflow is much more than that of the annual FDI flow coming in.
Anil Kapur, MD, South Asia Western Union, said: With the current monitoring system, it is possible to trace money in the entire system and its only logical that the caps should be raised to allow more money to come through.
Though the Indian Diaspora, estimated at 22m people, is nearly half the Chinese Diaspora, India has been receiving the maximum remittances for the past two years. A World Bank report estimated global remittances to developing countries at $230bn in 05, and it is expected to grow at 8% per year. The Indian remittance industry is expected to grow by 20-25% over the next three years, say analysts.