Foreign Exchange Regulations in India

These days, going abroad on work or for vacation is pretty common. In order to travel out of our country, we need the currency that the destination country uses. So, if you are going to the United States you will need US Dollars, if you go to Europe Euros and so on...

This article is about how much forex we can buy/keep and other regulations in India.

What is Foreign Exchange?

Foreign Exchange (forex in short) is the blanket term used to refer to the currencies of countries that are not our own. I am an Indian, so US Dollar, Singapore Dollar, Malaysian Ringets, UK Pounds etc are all Foreign Exchange for me. Similarly for citizens of those respective countries, the Indian Rupee is forex.

Purchasing foreign exchange

Foreign exchange can be bought from any authorised dealer, such as banks that deal in foreign currency. Besides these, money changers also provide exchange for business and private visits. Large banks like ICICI, HDFC, Axis Bank etc have a dedicated Forex department that deals with currency exchanges. If you give them Indian Rupees, they will give you the Forex equivalent to that amount. If the amount you are converting is less than Rs. 50,000/- banks will accept a cash payment. However, if the rupee equivalent exceeds Rs 50,000, the entire payment should be made through a crossed cheque or demand draft.

A point to note here is that, if your company is sending you on an official visit to any foreign country, they will take care of the currency conversion. You do not have to worry about it (Unless you feel, the amount they are giving is too small). For Personal Business Trips or for Vacations, it is our responsibility to get the currency converted ahead of time.

These days, all major airports have a currency converter. So, even if you forget to visit your bank to get the forex you want, you can get them in the Airport. However, the fee these guys at the airport charge will be a bit higher than the banks and the regular forex dealers.

Note: Foreign Exchange is not required for visits to Nepal and Bhutan.

How Much Forex Can I Obtain in a Year?

According to the Foreign Exchange Management Act 1999, foreign exchange up to US $10,000 in any financial year is allowed to be obtained, irrespective of the number of visits in the year.

The baseline/reference currency in almost all countries is the United States Dollar. So, irrespective of the country you are visiting, the forex you can carry is usually pegged at a US Dollar limit.

Unspent/Unused Foreign Currency

On return from a foreign trip, travellers must convert the unspent foreign currency back into rupees-currency notes within 90 days and travellers' cheques within 180 days of return. However, travellers can retain foreign exchange up to US $2,000, in the form of foreign currency notes or travellers' cheques for future use, provided it is unspent amount or a gift from a foreign resident.

I Repeat -

ANY FOREIGN CURRENCY NOTES IN EXCESS OF 2000 US DOLLARS MUST BE CONVERTED TO INDIAN RUPEES WITHIN 90 DAYS OF YOUR ARRIVAL BACK IN INDIA.

Are you thinking "The US Dollar is getting stronger day by day, why not retain my savings for a year or two and exchange it later when the dollar is much higher than now?"

Unfortunately, the purpose of this rule is to prevent just that. "Currency Speculation" is a rampant black market activity. If you wish to have exposure to forex and trade on them, there are numerous traders who offer forex trading services. Use them instead of holding on to physical foreign currency. It is illegal and can easily get you into trouble.