Reasons & Impact of Falling Rupees on NRIs

The Indian rupee fell around 12% against the US dollar between January and September this year. It also crossed the Rs 70 per dollar mark for the first time in August. But one good thing about this slide is that it is persuading non-resident Indians (NRIs) to send more money home.

Even otherwise, India receives more money from NRIs than any other country in the world. It received USD 69 billion worth of remittances in 2017, and this figure is only set to increase this year, given the depreciating value of the rupee.

The recent flood in Kerala also led to a massive increase in inward remittances. Kerala suffered major economic losses and in order to help rebuild the state, 2.4 million NRIs, a majority of them from the Gulf States, have contributed by sending money back home.

A falling rupee puts the households in the country at a disadvantage as it leads to an increase in the cost of imports. India’s economy being import-oriented, this has an adverse effect. But the flip side to depreciating currency is that it can be capitalised on by NRIs, of whom India has a very large number.

Whether it is the UAE dirham or the US dollar or the UK pound, all of them benefit in terms of rupee value when the Indian currency depreciates. This has resulted in a 25% increase this year in NRI remittances from the Gulf, and also from the US, the UK, and certain Asian countries.

As NRI remittances are of great value to the country in times of currency depreciation, the rules and regulations for the same have been simplified. Remittance companies have increased their send limits to India significantly. Remittance is also expected to increase as NRIs seek to benefit from the favourable exchange rate.

NRIs generally send more money home when the value of the rupee falls because it earns more returns. It’s a common practice among NRIs to take a loan from abroad and invest the money in India as the interest rates are lower and the value of the US dollar keeps increasing in India.

The rupee slide can benefit NRIs in a number of ways, depending on their income and budget.

The lower income groups of NRIs can invest in bank fixed deposits, either NRE or FCNR. NRE deposits offer the same interest rate as domestic fixed deposits, while FCNR offers less.

Higher income groups can invest in many schemes offered by banks and wealth management companies. Such facilities enable them to invest in stocks, mutual funds etc. Real-estate is also a profitable option when the rupee is depreciating.

There are many service providers in India that offer NRI banking solutions. Of them, HDFC Bank is one of the most preferred banking service providers, not only because of the quality of its services but also its prime locations. It has branches in Dubai, Bahrain, Abu Dhabi, Kenya, and Hong Kong. This solves the issue of accessibility.

Secondly, HDFC Bank technological framework makes it possible for NRIs to access a wide range of remittance options without physically visiting the bank. HDFC Bank provides comprehensive banking services, including savings accounts, premium banking services, fixed deposits, investments in mutual funds, insurance, and portfolio management services.

Though remittances from abroad are on the rise, NRIs should pay attention to the channels through which they conduct their investments, to maximise monetary benefits. Therefore, a banking service provider that offers 360-degree solutions with secure technology – such as HDFC Bank – will benefit NRIs should they choose this channel.

* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. All information provided in this document is subject to change. Viewers are advised to verify the content from original Government Acts/Rules/Notifications etc.