Remittance Needs in India

Financial services that serve up to 100 million internal migrants could have a major impact on financial inclusion levels in the country.

Most internal migrants come from low-income households searching for seasonal work in metropolitan areas, other districts or even other states. Hopes are high and despite slow asset accumulation, migration helps to prevent the workers and their families from sliding into further poverty. Often unbanked, migrants need channels to send money from the destination back to their home village. This need is mostly met by the informal market. However, it is argued that remittances channelled through bank accounts may encourage savings, and enable a better match for savings and investment in the economy. Formal financial services should therefore be regarded as essential and be available to any who want to access them.

Remittances are now a major focus of interest for policy makers, practitioners and researchers. Ever increasing migration and money transfer flows mean that remittances form an increasingly vital source of development finance and can act as an important gateway for increasing financial inclusion. In a country such as India, internal migration and domestic remittance flows are very substantial, even if inadequately documented, and require the attention their international counterparts have enjoyed. Moreover, receiving households are more likely to be the poorer households in a country, the very households most likely to be excluded from formal financial services. Thus the potential for securing financial inclusion through the transfer of domestic remittances through formal channels is substantial.