Clipped from: https://www.financialexpress.com/business/banking-finance/impact-on-remittances-may-be-minimal-bankers/4159382/
India’s remittance inflows are expected to remain stable amid escalating West Asia tensions, bankers and economists have saod. Major risks emerge only if prolonged conflict disrupts Gulf jobs or forces worker returns. US (27.7%) now tops sources, reducing GCC dependence. Impact hinges on conflict duration.
Why Bankers See ‘Positive Flows’ Despite West Asia Conflict
Remittance flows to India are expected to remain largely stable despite rising tensions in the West Asia, according to bankers and economists. Any meaningful disruption is unlikely unless the conflict deepens and begins to hurt the region’s economies or the employment prospects of Indian migrant workers.
Bankers believe it is still premature to gauge the full impact. The managing director and CEO at a private sector bank said the real risk would emerge only if tensions persist long enough to affect economic activity in the region. “Too early to assess. Unless this is prolonged, which impacts economies in the West Asia, any impact on remittances is expected to be minimal,” he said.
A senior official at a state-run bank said remittances would be affected only if the situation escalates to the point where regional activity slows significantly.
If expatriate workers in the Gulf countries are benched or forced to return home, it could eventually impact NRI deposits with banks.
Geopolitical Resilience
On the contrary, some bankers see a rise in inward remittances in the short term. A senior south-based private sector banker said, “At this stage, there is no basis for concerns on remittances. The binding variable is Gulf labour market conditions, not headline geopolitics. Near-term inflows may strengthen; downside risk emerges only if employment disruption or evacuation advisories materialise.”
“Normally, under such stressful conditions, we do experience a flight to safety. In the near term, it may witness positive flows,” said veteran banker Dinesh Khara.
Kunal Sodhani, head of treasury, Shinhan Bank, said: “In the near term, remittances may stay resilient or even rise due to fear-driven repatriation, but sustained instability could reduce flows later.”
India receives about $135 billion in inward remittances annually, making it the world’s largest recipient. India’s inward remittances rose 10.7% year-on-year to $39 billion in the second quarter of FY26, RBI data showed.
Structural Diversification
“Currently, the largest source of remittances to India is the US with a 27.7% share, followed by the UAE at 19.2% and the UK at 10.8%. Over the last few years, dependence on GCC countries as a source of remittances has been reducing,” said Gaura Sengupta, chief economist at IDFC First Bank.
Manoranjan Sharma, chief economist at Infomerics Ratings, said: “The conflict appears unlikely to drag on for a long period, given the imbalance in strength between the sides involved. If it were a prolonged conflict like the Russia–Ukraine War, we could have seen a meaningful impact on remittance flows. If tensions ease quickly, the impact would likely be limited to a temporary dent in the sentiment, rather than a structural disruption to inflows.”
Aditi Nayar, chief economist at ICRA, said: “The situation in the West Asia is unfolding, and the extent to which it prolongs and widens would have a bearing on India’s macros, including the impact of fuel prices on inflation and the twin deficits, as well as remittances,” she said.
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