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
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