How NRIs Can Take Advantage of The Weakening Rupee

The Indian rupee has witnessed a steady fall against major global currencies benefitting Non-Resident Indians (NRIs), who earn in strong foreign currencies. The crash opens new financial opportunities for them, as they can use the windfall for buying assets, remittance, or repayment of loans back home.

Banking Channels

Non-Resident External (NRE) accounts allow NRIs to deposit foreign earnings in India and repatriation is tax free.

Tax experts look at the benefits of this route. According to accountant Niyati Shah of 1 Finance, NRE accounts are "suitable for NRIs who want tax-efficient capital parking." Akshay Jain, Direct Tax Partner at NPV & Associates LLP, adds that there is "no RBI restriction on repatriation from an NRE account."

Another advantage of the weak rupee is the chance to earn high interest rates on deposits. By converting foreign currency into rupees and placing it in an NRE Fixed Deposit, NRIs can lock in attractive returns. Some small finance banks in India currently offer interest rates as high as 8 per cent per year. Since there is no tax on these deposits, NRIs can enjoy the double gains of favourable currency conversion and high yields.

Real Estate Becomes More Affordable

Property prices in India suddenly look cheaper when the rupee falls. For example, if a property is priced at 1 crore rupees (10 million RUPEES), a small depreciation in the rupee can be very beneficial in foreign exchange terms. Niranjan Hiranandani, vice chairman of the real estate body NAREDCO, points out that NRIs can "purchase more square feet of Indian real estate" thanks to the currency advantage. This means NRIs can buy larger or better-quality homes for the same amount of foreign currency. As property transactions take time, and if the rupee recovers by that time, it will be disastrous for the NRI buyer, experts warn.

Equity and Mutual Fund Investments

The weak rupee also creates opportunities in the stock market. Export-orientated companies-such as IT service providers, pharmaceutical firms, and manufacturers-earn much of their revenue in dollars or euros. When the rupee falls, their foreign earnings translate into higher profits in rupees. This makes their shares more attractive to investors. NRIs can access these sectors with equities or mutual fund exposures and hedge the risk of currency depreciation.

Easy Repayments

NRIs can utilise the currency depreciation for easy loan payments and for other expenses in India. For example, if an NRI earns in dollars, each dollar now covers more rupees, making it easier for repayments. However, if their loans are in foreign currency, it won't work in their favour because of the lower exchange rate.

Long-Term Currency Risks

As the exchange rates are prone to heavy fluctuations, experts urge them to adopt a hybrid strategy by converting part of their money into rupees to capitalise on the current exchange rate while investing the rest of it through avenues such as systematic investment plans (SIPs). An SIP involves converting smaller amounts regularly, which averages out the exchange rate and reduces the risk of converting at bad times.

For long-term savings, NRIs can also use Foreign Currency Non-Resident (FCNR) deposits. These accounts are held in any major foreign currencies.