Summary of this article
Exchange rates and conversion charges can reduce the final rupee amount.
Keeping widely accepted currency may help frequent international travellers.
Travellers should track RBI rules and avoid delaying forex conversion.
Returning from an international trip with some foreign currency left in the wallet is common. The amount may seem small, but the decision of what to do with it can make a difference to how much money a traveller eventually gets back.
The exchange rate offered on the day of conversion is only one part of the calculation. The rate at which the currency was purchased, the buyback rate and any service or handling charges can all affect the final rupee amount.
Exchange Rate Is Not The Only Factor
For someone holding a larger amount of foreign currency, even a small difference in the exchange rate can translate into a noticeable difference in the final amount. Travellers therefore need to compare the actual rupee amount they will receive after applicable charges, rather than focusing only on the displayed rate.
Pavan Kumar Kavad, Managing Director, Prithvi Exchange, highlighted this difference between the quoted rate and the amount ultimately received. “What actually matters is the difference between the rate at which they bought the currency and the rate at which it is bought back by the forex provider. There can also be applicable service or handling charges, so the final amount received can be different from what a traveller may initially expect,” Kavad said.
For example, on USD 1,000, a Rs 1 to Rs 2 movement in the exchange rate can mean a difference of Rs 1,000 to Rs 2,000 in the amount returned. Additional charges can reduce the final amount further.
When Keeping The Currency May Make Sense
Converting leftover forex immediately may not be necessary in every case. Travellers who expect to visit the same country again could use the unused currency on their next trip, provided it is permitted for use at the destination.
“If the traveller plans on travelling to the same country or a destination where the said currency is permitted for usage, retaining that currency would be a better choice. Say, the traveller has a currency that’s widely accepted, like USD or Euro, it is practical to retain the currency for recurring travel purposes, as it will save the traveller from bearing a transaction fee,” Kavad said.
Travellers also need to keep applicable Reserve Bank of India (RBI) rules in mind. Foreign currency notes and travellers’ cheques up to USD 2,000 can be retained within the limits prescribed under regulations.
Don’t Leave Unused Forex Forgotten
Another issue is simply keeping leftover currency aside and forgetting about it. Kavad pointed out that delaying conversion for too long can create difficulties, particularly when the currency is not frequently traded or the notes are difficult to exchange.
“Travellers simply hold the leftover foreign currency and delay the conversion back into Indian rupees. While that may seem harmless, unused forex should not be treated as something that can be held indefinitely,” Kavad said.
For smaller amounts, travellers can compare the amount they would receive after charges with the value of keeping the currency for another trip. Kavad advised, “It is better to calculate the net amount the traveller would receive after applying the exchange rate and charges.”
