India: Remittances return, but from rural to urban

  • An early pickup in economic activity and rise in reverse remittances from rural to urban have led to revival in domestic remittances in May 20 after a near total collapse in Mar 20 and Apr 20.
  • India’s dominant players such as Fino Payments Bank, Spice Digital, Eko Financial Services and PayPoint are reporting a 35-50% recovery in business in the first two weeks of May 20 against 90% fall in Mar 20 and Apr 20. More importantly, it is a reversal in trend.
  • With economic activities in urban India coming to a grinding halt since the lockdown, some players are seeing a reversal in remittance flows. Rural markets, which typically were receivers of remittances, are now turning into providers for the stranded migrant populace in the cities.
  • “Prior to Covid-19, we were doing remittances worth INR45bn every month that had come to a near standstill post lockdown, but has now recovered to a run rate of INR 20bn. Hopefully this will pick up further,” said Rishi Gupta, CEO, Fino Payments Bank. “We are seeing that many of migrant workers are trying to find employment options closer to home and in their home state, though these are still early days.”
  • There are predominantly six major corridors in India from where large chunk of remittances originate – Delhi, Mumbai, Indore, Rajasthan and Gujarat – with the states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, known as the BIMARU belt, being the largest receivers of these inflows.
  • The areas that saw a rise of 60% in outward transactions are the southern states least affected by the virus. The northern parts of the country have recovered about 40-50%, while states like Maharashtra and Gujarat have been worst hit with a 70% dip in business.

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