Kerala is on track to reach a major financial milestone as deposits from Non-Resident Indians (NRIs) in its banks are expected to surpass Rs 3 trillion during the January-March 2025 quarter. The state witnessed a remarkable surge in NRI deposits, which stood at Rs 2,86,063 crore as of December 31, 2024—marking a rise of nearly Rs 24,000 crore compared to the previous year. This represents a 9.4% increase year-on-year.
What Drives Kerala’s NRI Deposit Growth?
NRI deposits, held in foreign currency accounts by NRIs, are distinct from personal remittances sent home. However, a significant portion of these remittances finds its way into these accounts, primarily driven by favorable interest rates and currency exchange rates. The growth trajectory of NRI deposits has been steady over the years. Kerala crossed the Rs 1 trillion mark in NR deposits in December 2014, doubled that by March 2020, and added another Rs 1 trillion over the last five years.
One significant driver behind this growth is the depreciation of the Indian rupee. Over the past five years, the rupee has weakened from Rs 75.71 per US dollar to Rs 85.45, a 13% drop. This drop has effectively increased the value of every dollar sent by NRIs, resulting in a boost in deposits. The strong post-pandemic recovery in remittances, with a 19-20% increase, has further contributed to the surge in NRI deposits.
Kerala’s Share of India’s Remittances
Kerala has been a major player in India’s remittance economy, accounting for 19.7% of the total remittances received in India during 2023-24, second only to Maharashtra at 20.5%. The state’s share of remittances had dipped to 10.2% in 2020-21 but has since recovered significantly. According to the Reserve Bank of India’s March 2025 bulletin, India received a record $118.7 billion in remittances in 2023-24, up from $55.6 billion in 2010-11. Of this, Kerala accounted for $23.39 billion. The United States has become the top source of remittances, contributing 27.7%, followed by the UAE at 19.2%.
Shift in Remittance Sources: Gulf to West
The sources of remittances to Kerala are undergoing a shift. While Gulf countries like the UAE, Saudi Arabia, and Qatar have historically been key contributors, this trend is changing. K V Joseph of the International Institute of Migration and Development suggests that remittances from the Gulf may decline in the coming years due to limited opportunities for skilled workers. However, he believes that countries like the US, UK, and Canada will increasingly become important sources of remittances as they offer more opportunities.
Dr. Divya Balan, Assistant Professor at FLAME University, Pune, observes a more complex picture. She notes that while migration patterns are shifting, with more students and professionals heading to Western countries, the Gulf will remain a key destination for many Malayalis. The profile of migrants is changing, with an increase in students, skilled workers, and individuals taking loans to finance migration. These factors may help maintain strong remittance inflows into Kerala, especially if migrants secure long-term employment and residency abroad.
Looking Ahead: The Future of NRI Deposits in Kerala
While Kerala’s NRI deposits are expected to surpass the Rs 3 trillion mark soon, the evolving remittance landscape suggests a diversification of sources. The state will need to adapt to changing migration patterns and stay competitive in attracting NRI deposits. With a steady increase in remittances and deposits over the years, Kerala’s financial ecosystem is poised for continued growth, with the changing dynamics of global migration playing a crucial role in shaping the future of these inflows.