Dubai, July 27: A combination of economic factors resulted in Indian expats waking up this morning to find that the rupee had strengthened considerably – directly hitting their savings.
The Indian rupee had dropped below the benchmark of 12 to a dirham – hovering around the 11.95 mark this morning.
At Al Fardan Exchange the exchange rate for one dirham on Tuesday afternoon at 12.40 pm was 11.96 rupees.
A weak dollar thanks to the US debt crisis and upward revision of interest rates by the Reserve Bank of India today, were cited by money managers, banks and exchange houses as resulting in a stronger rupee.
None of this is good news for non-resident Indians (NRIs) who rely on a strong exchange rate to remit money and pay back loans taken to buy property back home.
The Reserve Bank of India (RBI) increased the repo rate, at which it lends to banks this morning by 50 basis points to 8 per cent in a desperate attempt to curb inflation in India which is at close to 10 per cent.
Ameir Hamza, Chief Operating Officer, State Bank of Travancore’s Dubai operations said the high interest rate will hurt NRIs in two ways now – by increasing their interest rate liability on outstanding loans and affecting the conversion ratio at which they remit money to India.
Saliamma Skaria, General Manager, City Exchange, Dubai, said the rupee-dirham exchange rate was at its worst in the recent past.
“Today the Indian rupee rate against dirham touched 11.95 which is bad when compared to the 12.40 that prevailed earlier,” Skaria said.
Joseph Thomas, Chief Representative IndusInd Bank said the frequent changes in repo and reverse repo rates will affect various interest rates including consumer loans, but depositors will get higher interest rates after a period.
“NRIs with surplus money to put in fixed deposits will get the benefit only after a gap,” he said, adding, “Most of the currencies have been affected today and the strong Indian rupee is to be seen in this situation.”
–Agencies