Rupee’s record plunge to trigger remittance rush
dubai — The plunge of the Indian rupee to a historic low on Thursday and the prospects of its further fall to a level between ₹70-₹72 against the dollar in the near term are expected to trigger a major remittance rush at the Gulf money exchanges with only a few more days left for expatriate employees to draw their November salaries.
On Thursday, as the Indian currency plunged to 68.8650 per dollar, way past its previous low of 68.8450 reached on August 28, 2013, or ₹18.65, against the greenback-pegged UAE dirham compared to ₹18.18 in January 2016, exchanges houses said they are bracing for an unprecedented rush at remittance counters.
The rupee — which tumbled to a new record low as global funds dumped Indian assets amid rising odds for a US interest-rate increase and as a slump in local yields damped the appeal of the nation’s debt — is widely estimated by analysts for further declines on expectations that there will be little intervention by the Reserve Bank of India to stall it fall.
There is speculation that the dirham-rupee exchange rates could be far more attractive at ₹19.05-₹19.56 in the event of the YOUR DIRHAMS FETCH MORE RUPEES Indian currency crossing the ₹70 barrier in the near future. However, all Indian expats are not overly enthusiastic to suddenly cash in on the windfall as some of them are in a real dilemma — whether to wait or not for the rate to cross ₹19 per dirham.
“I will rather wait to see if I could get better rates as those experts had forecast,” said Rijesh Kumaran, an office assistant at a Dubai company.
Sudhir Kumar Shetty, president of UAE Exchange Centre, said at times such steep rupee depreciation, expats tend to send more than what they normally do. “Along with those sending for family maintenance, middle-income and high net worth individuals also send more now, triggering remittance volumes significantly,” Shetty added.
“Also due to demonetisation of certain denominations among Indian currency notes, there is a scarcity of hard cash in Indian market. For this reason, NRIs tend to send money more to bank accounts,” said Shetty.
He said more money is also being remitted to India since Christmas and New Year are round the corner. “Due to these multiple factors, we expect the remittances to go up by six to eight per cent,” said Shetty.
Adeeb Ahamed, CEO of Lulu Exchange, said there has been marked interest from expats in sending money home with better rates. “With the rupee hovering around the lowest level for quite some time and looking at reports and expert views, remitters might be waiting to make use of the new low.” He said the rupee would test new low in due course consequent to the weakness in the stock market and prevailing slide in major currencies.
bangalore — Vijay Shekhar Sharma’s Twitter feed has come alive these past two weeks. From a roadside egg-seller in Bhopal to a soda hawker in Bangalore, the founder of Paytm has snapshots of the unusual array of merchants who ply the teeming streets of India — and are now turning to his digital payments startup for help.
Those fishmongers, vegetable vendors and rickshaw drivers count among the thousands who’ve signed onto India’s largest digital payments service since Prime Minister Narendra Modi triggered a nationwide cash crunch when he scrapped the country’s two largest note denominations.
While the aim was to vanquish “black money,” it could end up being the best thing to happen to its nascent online finance industry and haul its antiquated economy into the 21st century by making digital payments mainstream.
Sharma sensed the opportunity in a country where over 90 per cent of the transactions are cash-based. Within hours, Paytm designed fullpage ads to run in the biggest newspapers, proclaiming “Ab ATM Nahi, Paytm Karo” — no ATMs now, use Paytm.On Wednesday, the startup — which counts Alibaba Group Holding as a backer — outlined plans for what it called India’s first mobile checkout service, updating its app to accept credit and debit card payments.
“It is as if the black fog has lifted. The fintech opportunity in India is now looking huge,” said Sanjay Swamy, managing partner at Bangalore-based venture fund Prime Venture Partners, which has invested in seven financial technology startups. “The market size question has gone away and lead incumbents will become very big very fast, and their valuations will jump in a big way.”
Known as demonetisation, the scrapping of 500 and 1,000-rupee notes sent businesses into firefighting mode and drove panic-stricken citizens to banks to exchange old cash for new. It also sent millions
40m users and 250,000 enrolled merchants recorded by MobiKwik
scurrying to digital cash, as daily growth numbers of online payments startups illustrate.
In a country where there’re fewer than 25 million credit cards for a population of over a billion, One97 Communications’ Paytm and rivals such as FreeCharge notched up astounding growth within days. MobiKwik, which has 40 million users and 250,000 enrolled merchants, said it’s seen a 75-time surge in transactions in just the past week.
Airtel Payments Bank went live on Wednesday in the western state of Rajasthan. The unit of the country’s biggest phone company, Bharti Airtel, said its 10,000 retail outlets in towns and villages will function as banking points and offer services such as 7.25 per cent interest rates on savings accounts.
“This time will never come again,” said Upasana Taku, cofounder of Delhi-based MobiKwik, whose backers include Sequoia Capital, Cisco Investments and American Express. “All the reluctance and friction in adoption of digital payments has vanished overnight. We are updating our numbers every day as usage is going through the roof.”
Even before demonetisation, Indian digital payments had been expected to shoot up. The market could be worth $500 billion by 2020, or 10 times current estimates, Google and Boston Consulting Group said in July.
While the situation’s still developing, India could end up a rare bright spot for financial technology investors. Funding and deals for fintech fell globally for a second straight quarter in the July to September period, according to KPMG and CB Insights.
In contrast, Taku said investors are now asking her: “How much money do you want?”
Paytm — last valued at $5 billion by investors including Alibaba’s payments affiliate Ant Financial and MediaTek Inc — says it’s just getting started. It’s rolled out its app in 10 Indian languages and continues to sign up merchants by the thousands. It announced a zero-transaction fee for merchants on mobile payments and no-fee money transfers from Paytm to bank accounts we well as a DIY kit for novice neighborhood merchants and hawkers.