Determinants of Remittance Costs in South Asia: Evidence from India’s Outward Corridors

Abstract

India is the largest recipient of remittances in the world, yet the cost of sending remittances remains a persistent challenge.  SDG 10.c goals restricting the cost to 3 percent requires an investigation of the factors that keep costs elevated. This study analyzes the factors affecting the cost of sending remittances across South Asian corridors. It compares the cost of sending USD 200 and USD 500 through banks and Money Transfer Operators across four countries over a six-year period. Pooled OLS is employed to analyze the cost determinants and its robustness has been checked by Driscoll-Kraay and Prais-Winsten regression analysis. The major determinants of cost were GDP per capita, population and financial inclusion for bank transfers while speed was the major factor for USD 200 transfer by MTOs. Despite a limited sample size, the findings extend the theoretical understanding of remittance pricing and offer actionable insights for policies aimed at lowering transaction costs and meeting SDG 10.c targets.