Have you ever wondered where and how do Indian banks get foreign currency for money exchange?
Travellers going abroad from India frequently exchange Indian Rupees for a wide variety of foreign currencies and vice-versa. But are we really aware of how our bank procures currencies of different foreign countries?
We are here to douse your inquisitiveness by pouring some real knowledge on this subject.
The Facts Behind Currency Exchange in India
In our country, there are only two financial institutions that are legally authorized to do foreign currency exchange;
- RBI Licenced Money Changers
As per the RBI rule, only banks have the authority to import and export foreign currency in India.
So how do banks in India import foreign currencies from abroad?
Indian banks approach Authorised Dealers of Foreign Exchange abroad.
The major hubs from where foreign currencies are sourced are Dubai, Zurich (Switzerland), Singapore and Hongkong.
They sign an agreement with the Authorised Dealer(s) of their choice and the foreign currencies are physically imported.
How do RBI authorized money changers import foreign currencies in India?
They depend on banks to procure foreign currency from abroad (Since only banks are allowed to import forex).
The money changer will first approach a bank in India.
The next step is to find an authorised dealer abroad who can send stock of the foreign currencies.
An agreement will be made between the dealer abroad and the money changer in India regarding payment, exchange rates etc.
Banks will be legalising the entire process.
|Only freshly printed foreign currencies notes in mint condition are supplied by the Authorised dealers.
Thus a customer who wants to purchase foreign currency from a bank or a money changer in India can be sure that the notes are perfectly valid and legal tender.
Please Note: The import of foreign coins is not allowed.
When importing foreign currency notes from abroad, the payment is made in US dollars using wire transfer.
For example, Even if banks are importing UAE dirham, the payment must be made in US dollars to the authorized dealer.
Foreign currencies from travellers returning from abroad
Another source of foreign currency for banks and money changers are travellers.
When travellers return to India from abroad, they exchange their excess foreign currency in hand for the Indian rupee.
Also, when foreign travellers visit India with their currency, they buy Indian currency in exchange for their local currency.
On that note, let us see which are the major currencies that are readily available in India.
22 Major foreign currencies available in India
|6.||New Zealand Dollar|
|20.||Hong Kong Dollar|
|21.||South African Rand|
Who provides the best exchange rates, Banks or money changers?
Now that we know the major foreign currencies available in India, let us check who provides the best rates between banks and money changers.
The mainstream job of a bank is not currency exchange. It’s an added service they provide. Thus banks are not too concerned about acquiring customers for currency exchange and put up high margins on exchange rate.
But as far as a money changer is considered their major source of income is business they get out of foreign currency exchange. Hence they try their best to attract as many customers as possible by providing the best exchange rates.
Among many money changers in the country, the one that is reliable, cheap and easy to do the business should be a customer’s choice.
How to find the best exchange rate for currency exchange in India?
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