Remittance dip: Kerala to hunt nod to issue ‘diaspora bonds’ to tap into savings of non-residents
These bonds will tap into the savings of non-resident Keralites, a majority of whom are within the Gulf Cooperation Council (GCC) countries, where their deposits in banks earn near-zero per cent interest.
Kerala minister of finance Thomas Isaac said the pandemic has only added urgency to the bonds. (Express Photo by Gajendra Yadav)
Kerala, which has on the brink of 2 million migrant workers within the West Asian region and is among those worst hit on account of the Covid-19 -linked drop by global remittances, is gearing up to hunt regulatory approvals shortly to issue ‘diaspora bonds’.
While the government , together with the planet Bank, has been toying with the thought of issuing these specialised bonds, the pandemic has only added to the urgency to launch the bonds. These bonds will tap into the savings of non-resident Keralites, a majority of whom are within the Gulf Cooperation Council (GCC) countries, where their deposits in banks earn near-zero per cent interest.
“KIIFB will issue the bonds… they’re going to need to take necessary clearances from RBI, etc. The pandemic has only added urgency to the bonds,” Kerala minister of finance T M Thomas Isaac told The Sunday Express. KIIFB, or the Kerala Infrastructure Investment Fund Board, may be a statutory body under the state government’s Finance Department and has issued a young inviting a consortium of lead managers for the proposed issue.
“The International Bank for Reconstruction and Development is actively engaged with the govt of Kerala to create resilience to natural disasters since the good floods of 2018. The (Kerala) government… this year issued an order designating KIIFB because the nodal agency to issue a diaspora bond. There was also a choice to issue the diaspora bond in rupee terms and to plug it among non-resident Keralites and non-resident Indians, most of whom are within the Gulf Cooperation Council countries,” consistent with Dilip Ratha, International Bank for Reconstruction and Development lead economist on migration and remittances.
The diaspora bond will, alongside mobilising financial resources for development in Kerala, also will build a long-term bridge to its diasporas abroad, who are a key stakeholder within the state’s development efforts, Ratha said.
While remittances data by states in India isn’t generally available, Ratha said that going by Kerala migration surveys and International Bank for Reconstruction and Development staff estimates, remittance flows to Kerala in 2018 was estimated at $13 billion and around $14 billion in 2019.
Kerala and Punjab are two of the most important remittance recipients among Indian states, where an outsized number of households believe remittances and a drop by inflows are likely to end in disruptions to their financial lifelines, affecting their ability to consume, afford healthcare, and education.
India, the world’s top recipient of remittance transfers, took in $83 billion as remittances from workers abroad last year, and is projected to ascertain a 20 per cent drop by remittances this year.
Kerala, which accounted for over 15 per cent of India’s total inflows, might be among the worst impacted states on account of the drop by global remittance inflows.
