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29 March 2024

Low rupee spurs big-ticket remittances to India

UAE customers Rs17.15 for Dh1 today. (FILE)

Published
By VM Sathish

As the Indian rupee slide continues, with gold and oil importers making advance bookings, the remittance volume also increases.

Rupee continued to fall against US dollar despite Indian Finance Minister announcing there is no major crisis facing the currency and that it is stabilizing. Importers of oil and gold are taking forward booking options at better currency rates to take advantage of the low oil and gold prices in the international market, according to leading foreign exchange experts.

Depreciation of rupee against the dollar is seen as a year-end phenomenon. In fact, during this weekend, UAE customers received Rs17.19 for Dh1 and continue to hover around the same rate, with Rs17.15 for Dh1 today (Monday, December 22).

However, depreciation of rupee in the last couple of days has not caused a surge in the number of transactions and remittances through money exchanges, instead the volume of remittance has gone up. This is because big ticket customers wait for the right moment to remit money, when they get attractive exchange rates, according to Sudhir Kumar Shetty, Chief Operating Officer, UAE Exchange.

“About 90 per cent of customers remitting money to India are people who live without their families. While majority who remit money are blue collar workers sending between Rs15,000 and Rs20,000 per month, the big-ticket customers send between Rs5,00,000 and Rs1,00,00,000 taking advantage of the lower rates,” explained Shetty.

“Whatever happens on the exchange rate, normal customers continue sending money every month-end. It is the big-ticket customers with money saved in banks or other assets who use such opportunities to remit big amounts,”  Shetty said, adding that while the number of transactions will not go up during such periods, the volume of transactions does.

“Last year, India received about $70 billion in remittance from abroad and in 2014 it would be anywhere between $73 bn and  $75bn,” according to experts.

“The volume of money transacted through UAE Exchange must have gone up by five to six per cent,” Shetty added.

The current slide of Indian rupee against US dollar, according to Shetty, is due to a mismatch between dollar demand and supply as major importers are attempting to settle their quarterly or year-end settlements.

“For most overseas countries investing in India, December is the year-end. The Foreign Direct Investors and Foreign Institutional Investors are taking their money out of India to clear their books of account before end-December. We see it only as a year-end phenomenon and the Indian rupee may not go down below Rs60-Rs63 per dollar in 2015,” Shetty added.

The low oil price will also ease pressure on the rupee and it is most likely to stabilize between Rs60 and Rs63 a dollar, he added.

A source from City Exchange, the money exchange managed by the State Bank of India, said there was a huge rush when the Indian rupee rate declined to as low as Rs57.35.

An Indian expat Sashi Kumar said, “For a few months, I have been waiting to remit Dh100,000. When the rates crossed Rs17 for a dirham, I decided to remit the entire amount. But the next day the rate fell further. Now I am waiting for salary but do not know whether the rate will remain the same.”

“When the rupee rate hit Rs17 against a dirham, many customers took advance booking. They spent Dh300 extra to book Rs200,000 and our corporate customers are forward-booking for dollar,” said Sajith Kumar P K, Chief Executive Officer, JRG International Brokerage DMCC, which introduced an Indian rupee rate booking service through DGCX.

“The service provides customers to block a certain amount of rupee for the forthcoming 12 months. By spending a margin of Dh300 per booking and a service charge of below Dh 5 per booking, customers who do not have money ready for remittance can book the amount in advance,” Kumar explained.