- RBI cut rupee-linked forex derivative threshold from $100 million to $5 million
- A stronger rupee could lower expenses for accommodation, meals, and shopping abroad
- Travelers should compare rates, fees, and consider staged currency purchases to manage budgets
Planning an international holiday on a budget? The Reserve Bank of India's (RBI) latest foreign-exchange measures could affect how much Indians pay for dollars, euros, and other currencies, depending on the rupee's response. The changes do not directly restrict foreign-currency purchases for overseas travel. The RBI's measures primarily target activities in the foreign-exchange derivatives market to ease pressure on the rupee.
The RBI has reduced the threshold for specified rupee-linked foreign-exchange derivative positions that can be taken without establishing an underlying exposure from $100 million to $5 million.
Will the new forex rules make foreign travel cheaper?
The impact on travel budgets will depend on how the rupee moves against major currencies. If the measures help the rupee strengthen or stabilise against the US dollar, travellers may need fewer rupees to purchase the same amount of foreign currency. This could reduce the cost of overseas accommodation, meals, shopping and sightseeing when paid for in foreign currency.
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Travellers must note that a stronger rupee is not guaranteed. Global oil prices, US dollar movements, and foreign investment flows can also influence the rupee's value.
If a traveller needs $1,000, the currency cost would be ₹85,000 at an exchange rate of ₹85 per dollar and ₹90,000 at ₹90 per dollar. These amounts exclude conversion fees and other charges.
How to manage your forex budget?
1. Compare exchange rates: Check rates offered by authorised banks and money changers before buying foreign currency.
2. Check forex card charges: Compare currency-conversion mark-ups, loading fees and other applicable charges.
3. Review international card fees: Check foreign transaction fees and ATM withdrawal charges on your debit or credit card.
4. Buy currency in stages: Consider purchasing foreign currency in instalments to spread the risk of exchange-rate fluctuations. This does not guarantee a better rate.
5. Keep a buffer: Set aside extra money for unexpected expenses and potential currency movements during your trip.
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