Whenever you travel from India to another country or vice versa, you will have to convert your money to the currency of the country you are visiting.
Usually, currency exchange services are provided by banks and other small businesses that have the legal right to convert one currency for another. Most banks offer currency notes in various denominations so that you can meet your small to medium expenses during your overseas stay.
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Factors that Affect Money Exchange Rates in India
You will need to approach a bank/currency exchange business to get the best exchange rates before travelling to a foreign land. A foreign exchange rate is the rate you get when you convert your country’s currency to another.
Currency Exchange rates are not stable and can fluctuate daily due to external influences, including geopolitical tensions, demand of currencies, and inflation, only to name a few. Here are a few factors that affect foreign exchange rates:
- Inflation :If the inflation rate is low, expect appreciation of your currency value. Prices of goods and services usually rise at a very slow pace in countries with low inflation rates. Similarly, if the inflation rate is high, you will automatically see the depreciation of your country's currency value.
- Government Debt :Any country where the government is in debt is unlikely to receive any foreign capital, thereby directly leading to skyrocketing prices in the consumer goods sector. This usually leads to inflation which has an adverse effect on the currency value.
- Political Stability :A country’s economic condition depends partially but substantially on its political stability. Foreign investors usually take keen interest in countries with less political risk. And any country with more foreign capital is bound to witness appreciation of currency. Similarly, countries affected by political turmoil are likely to witness depreciation in exchange rates.
- Interest Rates :With the increase in interest rates, a country can expect an appreciation. In India, whenever the rupee falls, the Reserve Bank of India can choose to increase NRI deposit rates to influence fund inflows from NRIs, thereby increasing the demand of INR. This will eventually lead to the appreciation of currency.
- Trading :A country’s terms of trade can stand in a superior position if its export prices surpass its import prices by a much greater rice gap. This eventually leads to better revenue growth, resulting in appreciation of the currency.
Impact of Currency Conversions
Currency exchange rates often determine the current state of a nation’s economy. Though the rate keeps on fluctuating every day based on how the market is performing, it’s important for you to understand how it can affect a nation’s socio-economic conditions.
- Impact on Travellers :Let’s say that you are planning to travel to the US next month. However, due to certain market tensions, your currency has depreciated more than expected. In such a situation it’s better to mull over your travel plans and wait till the value of the currency improves.
- Impact on Businesses :Businesses that deal with overseas clients, transactions or money transfers often happen through wire transfer Wire Transfer or Foreign Currency Demand Draft. Often due to exchange rate fluctuations or the depreciation of currency, businesses end up either paying more or receiving less.
- Impact on Consumers :Suppose you have been planning to order an electric gadget from the US which costs $40. At the time you had viewed the product, the Indian rupee stood at let’s say Rs.65 against USD. However, due to market fluctuations, you see that INR stands at Rs.75 against USD. So, if you still go ahead with your order, you will end up paying more in your currency in spite of no zero hike in the actual price of the product. Similarly, due to exchange rate fluctuations, consumers often end up paying more.
FAQs on Currency Exchange Rates
- Which banks offer foreign currency exchange services?
- Where is it best to exchange money?
- Should I exchange money before I travel?
- Can I exchange currency at the Post Office?
- What can I do with leftover foreign currency?
- Is it better to withdraw money abroad or exchange?
- Is it cheaper to exchange money at home or abroad?
- How do I exchange money in a bank?
- Is it cheaper to exchange money at the airport?
- What are the documents required for buying foreign currency?
- What is a forex travel card?
Almost all the banks in India offer foreign currency exchange services. However, note that all the branches of a particular bank may not be authorised to exchange foreign currency. So, it’s better to locate the nearest branch that offers such services. Holding an account with the bank is essential to render such services.
You can exchange your currency at designated kiosks at the airports but that should be your least preferred option. To get best exchange rates, approach banks or other businesses authorised by RBI.
Yes, it’s better if you exchange your money before travelling.
You can avail international money transfer services through the Government-backed India Post. Through this service, you can send money from overseas to beneficiaries in India. However, outward remittance isn’t allowed under this service.
You can either sell, exchange or save your leftover currency for your next trip. Just remember to go for the best rates if you are planning to exchange.
It entirely depends on the ATM and the place from where you are exchanging money. Credit cards that don’t charge any foreign transaction fee can be an option. The bottom-line is using a debit or a credit card at ATMs is better than availing foreign exchange services during your overseas stay. Availing foreign exchange services abroad can cost you transaction fees and commissions. Other than that, using Forex cards can also help.
It’s always best to exchange your money at home.
Visit the nearest bank branch that offers currency exchange services and where you are an account holder. You should then ask for the exchange rate and service fee. If you are happy with the exchange rate, produce the required documents and complete your money exchange process.
No, exchanging money at the airport can be expensive.
You have to produce your passport, confirmed air ticket, Visa, and PAN card (if asked by the service provider) to buy foreign currency.
Forex cards work as a prepaid travel card where you can load foreign currency of your choice. You can use such cards to pay for your overseas expenses.