Federal Bank MD & CEO Shyam Srinivasan told TOI that the bank’s share of remittance was about 6% in 2013 and has more than tripled since then. “This is a very sticky, granular transaction volume that we get a share of. The natural corridor for money movement in India is Middle East-Kerala, and we are a dominant player in this part of the country. Over the years, we have worked on the Middle East-non-Kerala and went beyond to non-Middle East and non-Kerala flows as well,” said Srinivasan.
According to RBI data, private banks account for 52.8% of remittances, followed by public sector banks (39.4%) and foreign banks (7.8%). While bank-wise data is not available, industry sources said Federal Bank would be among the top. (see graphic)
Unlike other external sources of funds, the remittance channel has been extremely steady. “The remittance money that comes into India is non-arbitrage seeking and non-investment related. These are from people who must send money home to support their families and therefore are steady. Deposits that seek arbitrage opportunities tend to be choppy and not so consistent,” said Srinivasan.
Federal Bank has managed to retain its share despite the onslaught of technology players by adopting a two-pronged strategy. First, by adopting technology like blockchain to facilitate remittance from the Middle East and, second, by partnering with aggregators. While the nature of migration is changing, flows are determinant upon whether workers are moving to a country that offers citizenship or not.
“Our dominance is where people have gone for work but are not going to live there permanently or buy property abroad,” he said. The remittance flows are expected to come in handy for the bank at a time when its loans are growing at a healthy 18%. The bank is retaining its edge among competitors by partnering with fintechs by offering banking-as-a-service and at the same time using technology to improve its efficiency.