Expert Insight: The Hidden Cost of Inward Remittances
When NRIs remit money home, or Indian freelancers receive USD payments via platforms like PayPal or SWIFT, the number displayed on Google (the interbank spot rate) is never the rate you actually receive in your bank account.
The Bank Forex Spread
Banks operate on a "Buy/Sell Spread". When you receive foreign currency, the bank buys it from you to convert it to INR. They typically deduct a "Forex Markup" of 1% to 2.5% from the live spot rate. If the Google rate is ₹83.50, your bank might only give you ₹82.20 per dollar. On a $5,000 transaction, this hidden spread instantly erodes thousands of rupees of value.
GST on Currency Conversion
Furthermore, under Indian taxation laws, Authorised Dealer banks must levy GST on the service of currency conversion. The GST is calculated on slabs depending on the gross INR value exchanged, creating a secondary layer of friction on foreign inward remittances.