Millions of euros are transferred annually from Germany to India, supporting countless families and businesses. These transactions play a critical role, but the amount sent is only sometimes what is received due to fluctuations in currency exchange rates.
According to Statista, the digital remittance market in Germany alone is expected to reach over €10 billion by 2028. The exchange rate can significantly impact the value of remittances, making it essential to understand how to maximise the amount received in India.
In this blog, we'll explore how exchange rates affect remittances and offer tips on ensuring you get the most out of every euro sent.
How Are Currency Exchange Rates Determined?
The foreign exchange market (Forex) is like a giant currency marketplace. Millions of people buy and sell currencies constantly, causing prices (exchange rates) to fluctuate.
- High Demand, High Value: If many people want euros (demand increases), the euro becomes "stronger" than the rupee, meaning you get more rupees for each euro.
- Low Demand, Lower Value: The opposite happens if fewer people want euros (demand decreases).
Buying Rate vs. Selling Rate
Banks and currency exchange companies have two rates:
- Buying Rate: This is the price they pay for your foreign currency (e.g., euros).
- Selling Rate: This is the price they charge you to buy foreign currency (e.g., rupees).
The difference between these rates is their profit.
Mid-Market Rate
The mid-market or interbank rate is the midpoint between the buying and selling rates. It’s the most accurate reflection of a currency pair's actual value.
While most money transfer services and banks add a margin to the mid-market rate, knowing this rate can help you identify fair exchange rates.
What is the Impact of Exchange Rates on Money Transfers from Germany to India?
Currency exchange rates directly affect the money received in India when transferring funds from Germany. Let’s look at how this impact unfolds.
1. Direct Impact of Exchange Rates:
The amount received in India varies with the exchange rate. For example, at a rate of 90, €1000 converts to ₹90,000, but if it drops to 85, the same amount converts to ₹85,000. Such fluctuations can significantly affect the transferred amount.
2. Hidden Charges:
Some services may offer attractive rates but include hidden fees. To get the best deal, compare providers and check the full fee breakdown.
3. Timing of Transfers:
Exchange rates fluctuate so timing can be crucial. Monitoring rates and using rate alerts can help identify the best time to send money.
What Strategies Can NRIs in Germany Use to Get the Best Exchange Rates for Remittances to India?
NRIs in Germany can leverage several strategies to secure the best exchange rates for remittances:
1. Comparison of Rates:
The first step to getting the best exchange rates is comparing different money transfer services. Platforms like TransferWise, Vance, Remitly, and Western Union often have varying rates and fees. It's crucial to use online comparison tools to find the most favourable rates, which can significantly increase the amount received in India.
2. Timing and Frequency:
Exchange rates fluctuate frequently. By monitoring trends and timing the transfers when the rates are most favourable, NRIs can maximise their remittances. For instance, transferring money during economic stability or before significant policy announcements can result in better rates.
3. Use of Forex Cards:
Forex cards can be an excellent tool for managing exchange rates. These prepaid cards can be loaded when rates are favourable and used later. This method provides control over the exchange rate and can conveniently manage finances while travelling.
4. Currency Conversion Services:
Some banks and financial institutions offer specialised currency conversion services that can offer better rates. These services often have lower fees than standard bank transfers, making them an attractive option for NRIs.
Are There any Specific Times or Conditions When Exchange Rates Are More Favourable for Sending Money from Germany to India?
1. Market Demand and Supply:
The demand and supply of currencies influence exchange rates. For example, there is often an increased demand for sending money home during festive seasons or holidays, which can affect the rates. NRIs should be aware of these trends and plan their transfers accordingly.
2. Economic Announcements:
Major economic announcements, such as changes in interest rates by the European Central Bank or the Reserve Bank of India, can cause fluctuations in exchange rates. Depending on the expected market reaction, transferring money before or after such announcements is often beneficial.
3. Global Events:
Elections, trade agreements, or geopolitical tensions can impact currency values. When planning their remittances, NRIs should consider these factors to take advantage of favourable conditions.
Rate Alerts on Vance App
Never miss the perfect exchange rate again! Vance's latest app update offers rate alerts. Simply set your desired rate, and Vance will notify you when it's reached.
This ensures you get the most out of your money transfers, whether sending funds home, paying international bills, or managing investments. Maximise your savings and download the Vance app today!
In Conclusion
Maximising remittances through exchange rates is about being informed and strategic. NRIs in Germany can significantly benefit from comparing rates, monitoring market trends, and choosing the right transfer methods.
By following these strategies and staying vigilant, they can ensure that more of their hard-earned money reaches their families in India.
FAQs
Q1. What are the best platforms or services for NRIs in Germany to find competitive exchange rates?
Platforms like TransferWise, Remitly, and XE offer competitive rates and minimal fees, making them ideal choices for NRIs to maximise their remittances.
Q2. How do exchange rates impact the amount of money NRIs in Germany can send to India?
Higher exchange rates mean that more Indian Rupees are received per Euro sent, directly affecting the value of remittances.
Q3. Can NRIs in Germany lock in exchange rates for future remittances to India?
Several services offer the option to lock in current exchange rates for future transfers, providing security against market volatility.
Q4. What tools or apps can help NRIs in Germany track and compare exchange rates for remittances?
Apps like Vance, CurrencyFair, OFX, and Revolut provide real-time exchange rate tracking and comparison, helping users find the best deals.
Q5. Are there any financial institutions in Germany that offer better exchange rates for NRIs sending money to India?
Some banks may offer special rates for premium account holders or during promotional periods, so it's worth inquiring with your bank.
Q6. How can NRIs in Germany avoid hidden fees that affect exchange rates when remitting money to India?
Carefully review the terms and conditions of transfer services, looking out for hidden fees such as currency conversion fees or service charges.
Q7. What are some common mistakes NRIs in Germany should avoid when looking for the best exchange rates for remittances?
Avoiding proper research, failing to consider all associated fees, and not timing transfers strategically are common mistakes that can reduce the value of remittances.
