Indian expats capitalise on slump in rupee

To gain from favourable exchange rates, they are remitting money and taking out loans to deposit in banks at 10 per cent interest.

Indian expats are looking to remit money, as the dirham has strengthened against the Indian rupee. Reem Mohammed / The National

ABU DHABI // In the wake of the Indian rupee’s depreciation this week, many Indian expatriates remitted money and some even took out personal loans.

The dirham has been trading above 18 rupees in the past seven days.

The rupee’s recent slump as expats were getting their monthly wages meant that Indian expats in the UAE got better value for their money – particularly low-income workers.

The rupee, which was valued at between 10 and 11 rupees against the dirham in 2009 and 2010, was trading at 18.19 rupees against the dirham on Monday, and it edged up to 18.11 rupees on Tuesday.

For a worker who earns less than Dh1,000 a month, the rupee’s depreciation was a valuable opportunity, as Dh1,000 fetched more than 18,000 rupees.

“At the end of every month I have to transfer money to my family in India. If the exchange rates are good, nothing is better than that,” said Shahid Ali, an Indian worker.

“Our salaries are very low and I need to send at least 10,000 to 11,000 rupees home each month to finance their expenses. The rest I spend here, which could be about Dh300.”

Mr Ali said his monthly wage was Dh900.

“Because of good exchange rates I can send more money to India. But poor rates affect our budget at both ends [in India and in the UAE],” he said.

Another Indian expat, Krishna Mittal, said he would be remitting money to India in a couple of days because of the attractive exchange rates.

“I heard that we get 18.15 rupees [for a dirham on Monday]. This is good for us,” said the Abu Dhabi-based fisherman who earns Dh1,500 a month.

“Few thousand more rupees due to fluctuating conversion rates is good money for us because it buys plenty of stuff back home,” added the native of Gujarat state.

Foreign-exchange houses said the rupee might further decline because of global economic uncertainties, adding that this was a good time for Indian expats to enjoy a higher exchange rate for their dirhams.

“The weakening rupee could be attractive for expatriates, but those who live in India may face the worst because of the rising cost of living,” said Abdus Salam, an operations manager at Al Badar Exchange in Abu Dhabi.

In late August, India’s stock market fell to a seven-year low, and many Indian expats in the UAE took out personal loans and deposited the money in Indian banks, said Mr Salam.

“We have also seen some people remitting huge amounts,” he said.

Mr Salam added that the rupee could decline further or hover between 17 and 19 rupees against the dirham in the first quarter of next year.

The falling value of the rupee “indicates the slow economic performance of Indian financial markets”, he said.

Many Indians sought personal loans to then deposit the money in Indian banks that offer interest rates up to 10 per cent. Sharief Khan, an electrical engineer, said many people were taking personal loans to benefit from the current rupee-dirham exchange rate.

“I took some loans a month back to buy properties back home. I hold the money and keep monitoring the market trends.

“When I get good conversion rates I remit it,” he said.

“It’s easy to get personal loans here at very good rates but it’s very difficult in India, and interest rates are very high.”

Mr Salam advised people to carefully consider taking personal loans, but he also said that now was the right time to take out loans to benefit from the favourable exchange rate.