Kerala’s NRI deposits top Rs 3.35 trillion, nearing a third of bank deposits

The rupee’s slide is adding fresh momentum to Kerala’s NRI deposits, now more than Rs 3.35 trillion and nearly a third of all bank deposits in the state. But the boom has deeper roots: generations of migration, steady household remittances and banks competing hard for overseas savings. The result is a financial base that has proved resilient through shocks, even as domestic deposits grow faster and the Gulf’s share of remittances declines.

According to June 2026 figures from the State Level Bankers' Committee (SLBC), NRI deposits in the state stood at Rs 3,35,440 crore, up 17 per cent annually. Total bank deposits in Kerala were Rs 10,84,241 crore, up 13 per cent. NRI money makes up roughly 31 per cent of the state's deposit base.
The first trillion was reached in 2015, after about six years; the second and third each took five years.
Kerala's economic development over the years has been closely linked to remittances from abroad, particularly the Gulf. Data show that around 30-35 per cent of remittances to Kerala are kept as deposits, while the rest goes towards household operating costs, real estate purchases and house construction.
Interestingly, Covid-19 did not derail deposits. Between June and September 2020, deposits rose 2 per cent to Rs 2,18,196 crore, with a similar rise in the following quarter. By March 2021 they stood at Rs 2.27 lakh crore, up 14 per cent, even though an estimated 12 lakh non-resident Keralites had returned. Returnees who lost jobs or retired may have parked their savings in NRE accounts.
Federal Bank leads in NRI deposits in the state, with SBI a close second. As of 30 June 2026, Federal Bank held the largest share at Rs 94,155 crore, followed by the State Bank of India at Rs 87,526 crore. South Indian Bank held Rs 32,937 crore and Canara Bank Rs 23,823 crore.
Competition is intensifying. In 2021, private banks held 51.91 per cent of NRI deposits and public sector banks 46.51 per cent. Recent rate freedom lets smaller banks bid aggressively, and FCNR rates now range from 6.00 to 7.10 per cent. The NRI share of total deposits has also thinned, from nearly 39 per cent in 2018-19 to about 31 per cent, because domestic deposits are growing fast too.

Several factors are driving this buoyancy in Kerala's NRI deposits.
When the Indian rupee (INR) weakens against currencies like the US dollar, UAE dirham or Saudi riyal, remitting foreign currency yields more rupees. Indian banks generally offer higher interest rates on NRE/NRO fixed deposits than the low-rate environments in Gulf Cooperation Council (GCC) countries.

NRIs often exploit these dips by moving idle funds from overseas banks to take advantage of favourable conversion rates. The West Asian conflict has also boosted remittances, with reports of a 30-35 per cent surge from West Asia in March 2026, driven by precautionary transfers.
Even if the foreign currency remitted remains constant, the translated deposit value in rupee terms automatically expands on bank balance sheets. A weaker rupee makes domestic investments (land, residential property, fixed deposits) relatively cheaper in foreign currency terms.
Another advantage is that interest earned on NRE savings and term deposits in India is completely tax-free under Indian income tax law, making them low-risk, tax-efficient parking spots for capital.
Besides, local private and public sector banks in Kerala, such as Federal Bank, South Indian Bank and SBI, have extensive, tailored NRI networks and dedicated remittance products that efficiently capture liquid overseas capital. Regular, non-discretionary remittances to support family households, pay for education and handle healthcare create an ongoing inflow of funds regardless of foreign exchange rates.
Kerala's share of national remittances dropped to 10.2 per cent during the pandemic, while Maharashtra's rose to 35 per cent, but Kerala later regained ground. Kerala now has around 2.2 million NRIs living abroad.
Remittances rose thanks to a weaker rupee, skilled migration and higher migrant incomes. The rupee slid from Rs 71.03 in 2020 to Rs 89.96 per dollar over six years. It fell a further 7 per cent between January and June 2026.
While the Gulf countries still dominate in the remittances to Kerala, their share has fallen from 89 per cent in 2018 to 75 per cent now with advanced economies such as US, UK, Europe, Canada and Australia contributing more.
India leads the world in remittances. The World Bank expected it to cross $100 billion in 2022, the first country ever to do so. The Economic Survey puts FY25 receipts at $135.4 billion. Kerala received 19.7 per cent of India's remittances in 2023-24, second to Maharashtra at 20.5 per cent, with Tamil Nadu at 10.4 per cent. Together, the three take 50.6 per cent. Annual remittances to Kerala have crossed Rs 2 lakh crore for the first time.
Prospects look strong, with caveats. Bankers expect growth to moderate as West Asia tensions ease, with remittances broadly stable this year thanks to diversified sources. Risks include Gulf job losses, US policy shifts and a slowdown.