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Kerala gears up for sensible investment of inert NRI deposits

George Iype in Thiruvananthapuram

An unprecedented influx of deposits from Non Resident Indians in commercial banks in the industry-starved Kerala has forced the government to set up an NRI Industrial Investment Corporation to effectively channelise the expat funds.

The government has entrusted I-Kin, a 76:24 joint venture between ICICI and Kerala Industrial Infrastructure Development Corporation or KINFRA, with the task of conducting a detailed feasibility study on the proposed NRI Industrial Investment Corporation.

I-Kin will also advise the government on how to productively utilise the burgeoning NRI deposits for infrastructure and developmental projects in the state.

In the last six months, the government led by the Left Democratic Front and the commercial banks in the state have been facing a problem of plenty as expat remittances touched an all-time high of Rs 142.81 billion as on December 31, 1998.

Although NRI deposits in the state's banks have modestly increased in the last three years, in 1998 there has been a massive influx of expat funds. The NRI deposits in the state were Rs 85.07 billion in June 1996 and Rs 104.69 billion in June 1997.

But the whopping NRI deposits and the lack of any infrastructure and investment projects to divert these funds for productive use have affected the credit-deposit ratio of banks in Kerala.

While the NRI base accounts for more than 50 per cent of bank deposits, the absence of any industrial promotion kept the state's CD ratio stagnant at 43.06 per cent as on March 31, 1999. Thus the Reserve Bank of India has asked the banks in the state to achieve a CD ratio of 50 per cent in the current financial year. However, the state government accuses banks alone of being responsible for the poor CD ratio.

It says the banks are often reluctant to lend the NRI deposits for projects. But banks blame that there is an acute government apathy to planning and launching viable industrial projects to utilise the expat funds.

While the row between the government and the banks continues, officials said the maximum utilisation of the Rs 142.81 billion NRI deposits will depend on the viability of various industrial and infrastructure projects on which I-Kin would advise the government.

According to Sarath Chandran, CEO, I-Kin, the company is at an advanced stage of structuring a fund that will earn the NRIs a good return on their investment and provide an industrial upliftment to the state.

"The NRI remittances all these years were being used to buy gold jewellery and build massive houses. Our effort is to ensure that such mindless spending stops and NRIs become partners in the state's economic development," Chandran said.

He said the NRI Industrial Investment Corporation will be the apex authority in the state to exclusively channelise expat savings into various infrastructure projects in which NRIs will be partners and share-holders.

The non-utilisation of the huge NRI remittances has also forced the RBI to ask the commercial banks embark on various projects. Thus banks with the help of non-governmental organisations and religious and social groups, will now find out smaller beneficiaries to lend them increased credit.

Moreover, banks are also expected to open new loan schemes for individual projects in agriculture, poultry farming, sheep-breeding and seafood industry.

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Kerala