Sunday 18 December 2011

[www.keralites.net] How the depreciation in the value of INR beneficial for NRIs

 

Just month ago, on 16th November, 2011, the USD – INR exchange rate was 45.3150 that means to convert one USD to Indian Rupees you were need to pay Rs. 45.3150 but today on 16th December, 2011 this conversion become very expensive and you need to pay Rs. 52.745 for one USD and there is almost 3.95% depreciation in INR for one month and 16.40% for one year.  The below chart provides you with the details of one month variation in currency rates related to few currencies  like USD, SAR, AED, KWD, BHD and QAR.  The depreciation in the value of INR is on an average 3.5% for one month and almost 16% for one year.  The situation is roughly the same with all most all other currencies.
Date
Currency
USD
SAR
AED
KWD
BHD
QAR
16-Dec-11
52.7450
14.0005
14.2957
188.5335
139.2717
14.4210
15-Dec-11
53.6450
14.2053
14.5044
191.2583
141.3093
14.6318
14-Dec-11
53.7150
14.3596
14.6624
193.4482
142.8477
14.7903
13-Dec-11
53.2250
14.1587
14.4568
191.0278
140.8469
14.5829
12-Dec-11
52.8350
14.0269
14.3220
189.6702
139.5321
14.4458
9-Dec-11
52.0425
13.8319
14.1231
187.2271
137.5959
14.2449
8-Dec-11
51.7600
13.7895
14.0784
186.5621
137.1678
14.2020
7-Dec-11
51.7175
13.7689
14.0587
186.4843
136.9659
14.1805
6-Dec-11
0.0000
13.6825
0.0000
185.4033
136.1104
0.0000
5-Dec-11
51.4163
13.6825
13.9707
185.4201
136.1123
14.0919
2-Dec-11
51.2063
13.6265
13.9137
184.5046
135.5535
14.0320
1-Dec-11
51.4675
13.6974
13.9858
185.6054
136.2564
14.1068
30-Nov-11
52.2113
13.9009
14.1935
188.3231
138.2789
14.3161
29-Nov-11
52.0188
13.8799
14.1724
187.8158
138.0751
14.2949
28-Nov-11
51.9650
13.8749
14.1665
187.6759
138.0239
14.2896
25-Nov-11
52.2550
13.9294
14.2227
188.4356
138.5658
14.3459
24-Nov-11
52.0738
13.8749
14.1669
187.9199
138.0221
14.2896
23-Nov-11
52.3750
13.9920
14.2882
189.6664
139.1891
14.4101
22-Nov-11
52.3225
13.9868
14.2812
189.8309
139.1343
14.4046
21-Nov-11
52.1450
13.9518
14.2455
189.4530
138.7858
14.3685
18-Nov-11
51.3350
13.6666
13.9538
185.4848
135.9585
14.0747
17-Nov-11
50.9050
13.5839
13.8701
184.2963
135.1255
13.9899
16-Nov-11
50.7388
13.5334
13.8175
183.7219
134.6215
13.9376
16-Nov-10
45.3150
12.0997
12.3023
160.9328
120.3581
12.4622
One month  Depreciation
3.95%
3.45%
3.46%
2.62%
3.45%
3.47%
One Year  Depreciation
16.40%
15.71%
16.20%
17.15%
15.71%
15.72%
Note : above forex figures are compiled from Bloomberg .  The actual conversion rate the remitter is going to get is much less than the figures shown above.  The remitter wills get a rate after adjusting remittance banks/agencies commission.  For eg. On 14-Dec-2011 SAR-INR conversion rate as per Bloomberg were 14.3596, but when you had remitted money on that day you would have got only 14.10
How this depreciation in INR benefits NRIs
For every USD, AED, SAR, KWD or other currencies appreciated against INR (few examples listed above) sent to India, the remitter is going to get more INR against the respective currency. For example, on 16th November, SAR 10,000 remitted to India was the equivalent of Rs. 120,997.00, on 14th December; it was equivalent of Rs. 143,500.00 (the yearly highest rate). This is why remittances to India have sharply increased in the last few months. Now, as an NRI, you can take advantage of this fall in the following ways:
a)     NRO/NRE Bank Term Deposits.
Now day's banks are offering very good interest rates for NRO and domestic deposits.   Your savings helps you to earn annual interest rates in the range of 9.00 to 9.50% for a period of 2-5 years.  With a view to providing  greater flexibility to banks in mobilizing non-resident deposits and also in view of the prevailing market conditions, RBI has decided to  to deregulate interest rates on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts (the interest rates on term deposits under Ordinary Non-Resident (NRO) Accounts are already deregulated). Accordingly, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit Account and savings deposits under Ordinary Non-Resident (NRO) Accounts with w.e.f 16-Dec-2011.  This will definitely help NRIs to earn more return on their investments in NRE/NRO accounts.   Please keep in mind that, Tax will be deducted from the income earned on NRO deposits, income earned on NRE deposits are fully exempted from Income Tax.
b)    Investment  in Real Estates
The real estate prices are desperately down now days due to lot of economic and other factors.  If you want, you can also consider additional investments in your real estate portfolio by way of adding a second house or residential apartment or land.  This all finally dependence on the availability of surplus money and your desire to buy an additional home or piece of land.
It was reported in Business Standard that, to cash in on the rupee depreciation, non-resident Indians (NRIs) are making a beeline to buy property in India. Most of developers claimed a 25 to 30 per cent spurt in sales to NRIs over the last two months.  Since August, the Indian currency has fallen by around 20 per cent against the US dollar. According to real estate companies, brokers, analysts and consultants, this has triggered a substantial rise in the volume of property-related enquiries from NRIs. The actual deal numbers have also gone up considerably. Many NRI buyers are even buying multiple units for investment purposes.
 
 
c)     Investments in Company Deposits.
 
NRIs can invest in company deposits otherwise called Corporate Fixed Deposits from    their NRO account.  Good Corporate FDs are offering interest rates in the range of 9 – 10.50%  (Eg. HDFC, KTFC etc)  
 
d)  Investments in Equity / Mutual Funds/ Commodities
I am not sure this is the right time to invest in company shares and equity mutual funds.  Share market is very volatile now a days and nobody knows in which direction it's marching.   If you are investing in equity/Mutual Funds because the markets are depressed, try and avoid a lump sum investment and strict to the time horizon and opt for a Systematic Investment Plan, as predicted the market will be more volatile in the coming days.  You need to target  minimum 3-4 years investment period for equity or equity based mutual funds otherwise deploy your surplus money in fixed income generating securities like bank term deposits, company deposits etc .   Also, please keep the tax aspect in your mind before depositing your money in any of the investment options described above.
 
Best Regards
Prakash Nair

www.keralites.net

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